April 21, 2021

How to reduce return rates without cutting off customers

This article is an excerpt from our guide for ecommerce retailers: eCommerce Returns 101. The guide goes through every stage of the return process from policy to process, as well as covering customer experience and return rate reduction. Download your copy for free here.

Beware the doom-mongers. You’ll know them when you see them – they’re the ones clutching their half-empty coffee cup as they describe ecommerce returns as “out of control” and “an epidemic”. They are often the same people who believe that making it harder for customers to return goods is the answer.

Hold your horses, buddy! When well-managed, returns can play a really important role in customer acquisition and continued loyalty. After all, some returns might not even be the customer’s fault. So, let’s take a moment to think about returns from inside your business and look at what you can do to reduce them without your customers even noticing.

Who is your returns warrior?

To reduce your returns and make them work for you, you need a hero.

  • Someone who can step up and take ownership.
  • Someone fearless and focused.
  • Someone who can see the bigger picture and create shared goals.

You see, while returns really are an issue for everyone involved in your business, they often aren’t considered a key priority in amongst the day-to-day. Your returns warrior can bring the issues and the people together so that returns don’t get overlooked.

Trust the data

How much are you guessing and how much do you really know? The key to bringing your returns rate down lies in your data. The person you’ve appointed ‘returns warrior/champion/project manager/guru’ will need to know exactly what your returns look like at any given time and do this by generating reports with the right information. Starting with a series of weekly and monthly ‘top tens’, which look at returns by:

  • SKU
  • Vendor/drop shipper/supplier
  • Customer segment
  • Product Category
  • Price range

Once this information is generated, they need to dive a little deeper and sort the return rates by value (your return rate multiplied by profit margin on a product), to give the value loss of the return.

For example…

  • Your most-returned SKU is a coffee mug. It retails for $5, and you make $1.50 profit. It gets returned 100 times, so the value-adjusted result is $150.
  • Your second most-returned SKU, with 50 returns, is a TV which nets you $100 margin in a sale. That’s $5000 of margin that got returned.

You can also apply this logic to calculate the value impact of the returns rate by supplier, customer segment, product category or price range, but you see what we’re getting at here – the volume of returns alone should never be your sole metric.

Products + people = a better picture

Those ‘top tens’ are great, but you need more. More context, more understanding of customer behaviour, more patterns. A further knowledge-gathering exercise is required to combine everything we’ve already learnt above with additional data on:

  • Customer Satisfaction (specifically in regard to returns)
  • Customer lifetime value (grouped by returns volume in the same period)
  • Week-on-week and month-on-month view of the average time between return booked, return received, and refund authorised.
  • Customer contact reasons, week-on-week and month-on-month

Now it’s time to book a weekly recurring team meeting flagged ‘critical’, because this insight is going to be essential to driving your business forward across the board, not just in return rate reduction.

Where the action happens

In the scale of one to ten where one is “the most unnecessary meeting of all time” and ten is “presidential briefing”, returns meetings are a solid eight. No one is going to die if you don’t have them, but the success of your business absolutely depends on them. This meeting is for sharing the data and deciding what it means for your business and what actions you need to take to reduce return rates – without hurting customer loyalty and acquisition.

There are lots of potential outcomes from this meeting, but there will always be actions. In fact, if anyone leaves without an action it’s a problem. These are just some ways in which everyone gets involved.

  • Ecommerce/Customer service: Your data may have highlighted a fundamental flaw with your website that means customers don’t have a clear idea of measurements or sizing. Or colour. Or even just how the product looks overall – this must be addressed.
  • Buying: There may be a problem with a product – or a whole range of products. Why is this happening and how do we stop it?
  • Logistics/operations: The same kinds of products may be arriving damaged and in broken packaging. This requires investigation.
  • Marketing: You may see patterns of purchasing that surprise you. Serial returners, for example, can prove to be seriously valuable [LINK TO BLOG] –. What does this knowledge mean for your marketing?
  • Marketing: Or you may discover practices that are unacceptable. Wardrobing is a very real problem, but it can be identified and addressed with the right data.

Everyone will walk away with actions, but more importantly, everyone will walk away with an understanding that this is really important and what potential it has for your business. This meeting is the place where change begins.

Goals are good

These meetings are also a great place to set out a direction for the future – otherwise you’re just firefighting that week’s problem. When you have the data in black and white in front of you, it’s basically telling you just what kind of service your customers expect from you in order to come back and shop with you again. That insight is used by major retailers like ASOS or IKEA to channel investment in the customer experience and beyond. Reducing the returns rate is often the driving force behind the introduction of technologies like AR on retailers’ websites, launching customer service live chats, or allowing real customer reviews.

Obviously, among the grander plans are those that can simply be targets for improvement. For example:

  • Buying can pay ongoing attention to loss-making SKUs/vendors and seek alternatives.
  • Logistics can support resale and cashflow by working towards a target that will get returns back into stock as a matter of priority.
  • Marketing can create accurate targeted content for those high lifetime value customers and actively remove serial returners of no value from campaigns.

They’re not sexy or glamorous, but they all share long-term measurable effects. And that translates into profit. Which is definitely sexy and glamorous by anyone’s standards.

Keep on keeping on

The one thing that the doom-mongers do have right is this: returns are endless. They’re a fact of retail life. So, it makes total sense that if products keep being returned, you need to stay focused on that data. And as your business grows (and it surely will), so will your returns – and the challenge. Continuing the virtuous circle you’ve created means keeping on top of a lot of information, which right now might be coming at you in streams, from lots of different places:

  • Returns packing slips from the warehouse
  • Emails to the customer service inbox
  • Daily and weekly sales
  • Campaign activity
  • Product pipelines

As volumes of sales increase, these can easily become difficult to wrestle in a timely way. Ultimately, you could find that returns slip back down the priority list as you focus on your growing business – but make sure they’re always in the mix for your attention and energy.

Keeping the customer experience at the forefront

The biggest single change you can make quickly is to put all the elements of the returns experience into one tidy, effective and customer-friendly digital returns journey. It gives the truest visibility of what is coming back, why and when – directly from the customer, easy to access and integrate with your business operations.

And because the data comes in real-time, it can immediately present problems with products, allow you to flag unusual customer activity and tweak your customer communications (maybe they need encouraging them to get that return in the post a little faster!) When these elements embed themselves as natural courses of action in your business, it means that the way you now deal with returns is truly outcome driven.

In conclusion

Returns are such an essential part of online shopping. Customers rely upon them even when they don’t use them, for the reassurance that they can’t go too wrong by shopping with you. Putting up barriers to stop them returning items can break the trust that underpins ecommerce more than any other shopping interaction. The real cost of returns often lies in this unseen loss of customer loyalty.

And it’s the unseen nature of so much of returns that does damage to retailers who aren’t prepared. Because of the perception that returns is a logistical problem and cost centre, it’s been historically neglected and left out of digital transformation. Visibility is murky and problems are harder to solve when they’re hard to measure in the first place.

Digitising returns is the key to setting up a proper process. You won’t get it perfected on day one, but you’ll get a lot closer with the lights on than you can by working in the dark.

Download the full copy of eCommerce Returns 101 here.

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