Ecommerce is now a large chunk of all retail sales. With that switch comes efficiency and convenience as retailers vertically integrate the shopping experience, but it also comes with higher risk of returns. According to the 2017 UPS Pulse of the Online Shopper™ study, 75% of consumers have shipped returns back to the retailer, an increase of seven points from 2016. Returns are always expensive, but for ecommerce businesses, the logistics costs can be crippling. After all, free shipping on sales and returns ups the cost of goods sold. When facing a potential return rate of 40 percent or higher, it is no surprise that some brands have been slow to adopt an aggressive ecommerce strategy. Managing return rates is essential for profitability via digital channels. Here are a few tips on industry best practices that can help reduce returns and customer churn.
1. The Buyers Journey Shouldn't be the Start of the Return Process
Customers return products for a variety of reasons, but retailers are often the source of return traffic. A quick look at return codes reveals that 65 percent of returns might lead directly to the retailer. When 22 percent of returns list "wrong product received" as the reason for a return, businesses need to pay close attention to what is happening in their ecommerce fulfillment operation. Combine that with damaged items and improperly displayed products, and it is easy to see where businesses can improve. Better product imagery, clear and accurate size charts, videos of the product (when it is affordable to offer them), and concise and accurate product descriptions can all help minimize these reasons for return. After all, when customers know what they will receive ahead of time, there is less motivation to return a product.
2. Track Your Returns and Use the Data
While a few customers practice the serial return policy, most do not. But, some products post massive return numbers. If one product is facing higher-than-average return rates, it might be time to pull the listing and explore the potential issues with that specific item. By reducing the number of high return items, ecommerce businesses can reduce total return rates. Often, a few high return rate items skew the rates upward. Tracking return rates by item offers quick and easy insight into which products generate the most customer dissatisfaction.
3. Be Lenient with Your Return Policy
For some, the immediate solution to a high rate of returns is to tighten up the return policy. Pass some of the cost of returns on to customers, and return rates will instantly drop. Unfortunately, churn rates will skyrocket to match. Zappos offers a great example of what a liberal return policy can do for an ecommerce business. According to the former VP of services and operations, a 50 percent return rate is simply the cost of doing business with the highest spending customers - and that may be true across the board. It is true that some customers will order multiple sizes to try at home. The cost of returns will exceed the value of the sale. However, the lifetime value of the customer is worth handling the original returns. As the customer becomes familiar with different brands, there will be less need to order multiple sizes. As online stores become better at pinpointing sizing, customers will not need to try as many options to get a great fit.
There is no one-size-fits-all solution to a high return rate, but it is important to understand that return rates are controllable and can be influenced by the retailer. Better, no-hassle return policies can actually help increase profits, while improved product descriptions can reduce the customer-driven ordering mistakes.
Onestop Internet is a full-service ecommerce solution having delivered vertically integrated commerce to more than 130 retail brands.