Why Are Returns Important?

The general sentiment in retail is that returns are hard—that they cut into available inventory, harm profitability, and complicate logistical operations (especially in ecommerce). 

Yet as consumers do more shopping online and less in-store, their expectations around what the returns experience should entail continue to grow. More than 60% of online shoppers tie their buying decisions to a retailer's return policies, and simple, seamless policies win the sale almost every time. (This is why you see “free shipping, free returns” on so many homepages.)

People want returns rules and processes that are easy to understand and even easier to put into action. Which means, retailers can’t afford to put their collective head in the sand when it comes to modernizing the returns experience.

Put another way, when consumers shop online, they’re not simply shopping for a product, they’re shopping for fulfillment too—delivery and returns. If two retailers offer the same product, it’s the one that delivers the most convenient post-purchase experience (from delivery to exchanges) that secures the sale.

The delivery element is easy enough for retailers to tackle, but it’s the reverse logistics journey that gets complicated (e.g., asking people to print their own labels, define return reasons, etc.) and costly (e.g., pre-printed return labels, running a call center, etc.) in a hurry. 

Giving consumers control

Consumers want to control when, where, and how they return merchandise. 

Marrying that depth of convenience with affordability is something retailers everywhere are striving to solve. Free returns, pre-printed return labels, extra packing materials—these and other reverse logistic expenses hammer margins. It is a complicated proposition, but it is solvable. If it wasn’t, companies such as Stitch Fix, Rent the Runway, and Warby Parker wouldn’t exist.

One thing many brands are doing is using data to determine when and where to charge for returns. Shoppers with high-value baskets, or those who demonstrate behaviors that make them likely to be future high-value customers, are worth additional costs (longer return windows, free shipping, value-added services such as home pickup, and more). 

Similarly, limiting first-time shoppers who are likely to be one-and-done to a 15-day free return window is an easy way to cultivate the sale (free returns!) with limitations (shorter return window) that help the bottom line at scale.

The 3 layers of returns

Customer experience, infrastructure and intelligence, and logistics—these are the three core elements of any returns process.

Customer experience

• How do you give shoppers the flexibility and choice they want from a returns experience?

• Something that lets shoppers decide when, where, and how they complete their returns?

Infrastructure and intelligence

• What kind of SKU-level intelligence can you tap to assess returns profitability?

• Does the size of certain items make it cost-prohibitive to offer free returns on? 

• Is distribution being handled by your own warehouse or a dropshipper, and how does that impact the cost of processing a return? 

• Are you low on inventory for certain items and, therefore, more willing to eat the cost of processing a return end-to-end? (Sidebar—at Narvar, we’ve noticed retailers who offer shoppers at-home returns get inventory back 25% faster than those who don’t.)

Logistics

• Do customers need to return an item directly to you by mail? 

• Do you want to offer boxless returns via a third-party (e.g., Walgreens)?

• Are you willing to provide a courier service that will pick up a return directly from the customer’s home?

Convenience over cost

That last bullet point is one worth ending on. 

In a world where consumers are willing to spend $8 to get a $6 burrito delivered to their door, retailers shouldn’t be shy about asking customers to “foot the bill” if the return experience is truly seamless and completely convenient. 

Put another way, returns don’t need to be “free” if you offer a premium experience. A large subset of customers are actually looking for that convenient experience and they're willing to pay for it. Charging for next-day, at-home pickup on the inbound fulfillment side is no different than charging a little extra for same-day delivery on the outbound side. 

It is a great way for you to meet the customer’s needs and do so profitability.