April 22, 2021

The oversized impact of returns

This blog article is part of our South Korea market insight series, exploring opportunities for parcel carriers and offering insight and comparison to other parcel markets around the world. Download your free copy of our South Korea market report here.

Rocket, the delivery arm of South Korea’s largest online retailer, Coupang, says it sees a very low rate of returns – just 2-3% of its outbound volume. But despite the relatively low returns rate, returns are every bit as important to the shoppers of South Korea as to those in any other developed economy, with “returns/refund/exchange convenience” emerging as the most important out of six aspects of delivery satisfaction in a 2019 survey run by Consumer Insight and Hanyang University Retail Research Center. The survey suggests that shoppers feel that returns are even more important than speed of delivery, with more than twice as many consumers selecting convenient returns than rapid delivery.

So what’s the problem?

Returns tend to be processed via carrier and picked-up from the customer’s home. Korean shoppers want to be able to change their mind for any reason and return items free of charge where possible. Although many retailers expect shoppers to pay the shipping costs of returned items, some are starting to use returns as a customer acquisition tool. Coupang, for example, offers its Rocket Wow loyalty program members free delivery and returns.

While overall return rates are often fairly low, retailers clearly need to be sensitive to the expectations of their customers whilst also looking after their own margins. It’s easy to imagine that as free returns continue to be used as an acquisition tool in ecommerce, return rates are likely to rise.

For carriers, some kind of synergy around the pickup of these returns from homes will have to be found in order to make economic sense of the home collection service. At low return rates, such an offering is expensive but manageable. But if return rates increase, this service may quickly become unsustainable alone.   

For retailers, offering inexpensive returns to customers is costly and will drive them to seek efficiencies – but they could also benefit from getting more data and insight from their returns.

Solving a massive retail headache

Most retailers are juggling multiple back-end systems. Eliminating as much duplication and cost from processes is vital when there is limited scope to increase price or decrease service levels. 

Retailers plugged into a single, end-to-end returns platform (provided by a carrier) could improve the customer experience of their returns process whilst removing unnecessary cost from their operations. Hassle isn’t just bad for customers – it needs to be done away with throughout the network.

Presented with a simple-to-use, no-hassle returns platform, customers would be able to process their collections and request their refunds with ease. The carrier would be able to see precisely what collections would need to be made on any given route, and the retailer would have full visibility of their returns pipeline.

That visibility translates into data – data about who is returning, what they’re returning, and how often they return. Having this insight allows a retailer to tailor the returns experience and even the returns policy to individuals. For example, they may decide that high-value customers refunds can be released before the returned item has been processed, to give an extra benefit to their most valuable shoppers. Given that carriers sit at the middle of the returns transaction between customer and retailer, they’re ideally placed to offer that platform to the retailer as part of their services. From the platform there are plenty of opportunities to develop additional revenue streams, for example providing anonymised data from across the retailer base, building a picture of returns behaviour and segments to allow retailers to better understand, market to and delight their customer base.

To find out how Doddle can help you improve your returns proposition to retailers, get in touch today.

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