Does anyone ever look forward to returning a product? Is a retailer ever happy to get merchandise back? Retail returns cost the US retail industry over $250 billion in lost sales (National Retail Federation, 2015), presenting customers with a mess of phone menus, receipts and fine-text policies. Why does anyone bother?
Despite the costs, generous return policies motivate a whopping 95% of customers to purchase again, with 64% of customers recommending the brand (Endicia, 2013). Correspondingly, nearly 87% of customers experiencing a poor return experience will report their experience to friends and family. Returns are a critical part of the shopping experience, and one of the most important drivers of customer loyalty.
Returns: Retail’s Black Sheep
Returns have always been a cost center for both brick-and-mortar and ecommerce retailers. Beyond the lost sales, there are the higher costs of inefficient return shipping, overburdened distribution centers also managing reverse logistics, and multiple service contacts. Per-item return-processing costs can be 2-3 times the original outbound fulfillment costs. Fraud and abuse is also a serious concern for retailers. Accounting for 6% of all returns (according to the NRF), fraud and abuse are costly side-effects of generous policies.
Per-item return-processing costs can be 2-3 times the original outbound fulfillment costs.
The situation is no better from the other side. The customer experience around the traditional returns process is fragmented, ambiguous and slow. An ecommerce customer may have to make multiple contacts with different systems and different operators before getting an RMA (Return Merchandise Authorization). They often wait weeks for the return package to arrive, be processed, and finally be refunded–typically without any notification or update along the way. The customer has no idea whether their package arrived, whether the return was accepted, whether they’ll be charged a restocking fee or when the refund will arrive.
These problems on both the retailer and customer side are not new. Their continued existence is emblematic of the industry’s neglect of the post-purchase experience, and represents a missed opportunity. According to the Adobe Digital Index, repeat customers generate 3 to 7 times higher revenue per visit, making up 40% of all ecommerce revenue. With 95% of customers citing generous return policies motivating repeat purchases, it’s a shame to jeopardize that valuable relationship with a subpar returns experience.
Modernizing and Leveraging Returns
There’s a light at the end of the tunnel: modernizing returns with digital tools. Customers already prefer their computers to mall lines, purchasing more and more online. Retailers also report three times lower fraud (NRF, 2015) from products purchased online versus products purchased in-store.
The next step is to reinvent the online returns user experience. User interface and user experience innovations used for years on the purchase side can be adapted–with some important data and insight–to provide clarity and definition to the returns process. Package tracking systems can be extended to the return trip and integrated with retailers’ supply chain systems, providing real-time processing status. All this serves to eliminate ambiguity from the returns process–the leading driver of customer dissatisfaction–and ensure a seamless experience.
Generous return policies motivate a whopping 95% of customers to purchase again, with 64% of customers recommending the brand.
Properly implemented, a comprehensive returns user experience can offer more than quality service and improved efficiency. Retailers can leverage the additional customer engagement to increase sales and margin. A product return is not a liability–it’s an opportunity. Any customer returning a product has an unfulfilled need that the right algorithm can identify: something clearly didn’t work out and there’s still a problem to solve. A customer reporting that their laptop is slow needs one with a faster processor or more memory. Another unhappy with the fit of a jacket is probably interested in alternatives other customers have paired with the same pants they’d ordered.
There’s no better time to offer these compelling solutions than during the returns process. With the acceptance of the return, a customer is empowered to purchase again with more confidence, and can be marketed to with more specificity: a savvy retailer already knows what brought a customer to the purchased product, and now knows (through well-designed surveys and the properties of the return) exactly what went wrong. Powerful analytics can continue to refine product recommendations and increase conversions.
Combining the premium experiences of pre-purchase marketing with modern innovations in data processing and supply chain management will dramatically transform the returns process. It’s time to convert returned products into return customers and a return on investment!
We’d love to hear how you approach returns and exchanges, or if you’ve been inspired by great examples out in the wild – hit us on Twitter @narvarinc.