August 3, 2021
What’s your returns strategy?
eCommerce retailers tend to have a strategic lean towards growth. It makes sense – for digitally native brands, the ethos of capturing as much of the market as possible as quickly as possible is essential for surviving past the first year. This outlook brings challenges further down the line, because as the business scales, the efficiency with which it operates and its ability to retain the customers it has won become the twin pillars of longer-term success. That means growth maximisation can’t be the primary focus, and the strategy must pivot.
As part of that pivot, ecommerce retailers need to make sure they have a coherent returns strategy that fits their wider goal. This strategy is much more than just the policy on the website, although that policy is crucial! A returns strategy includes the following elements:
- A philosophy
- An owner
- A process
Dealing with returns costs a lot of money. The more returns you deal with, the more it costs you, at least in the short term. In the long term, a great returns experience should net you more loyal customers and increased customer lifetime value. The philosophy element of your strategy really refers to where you want to sit on this spectrum. For example, if stellar customer service is a big part of your brand promise? You probably want to maximise the ease of returns and accept higher short-term costs. Don’t worry – you can still make a big dent in how much returns cost you without costing yourself customers.
To decide on your philosophy, you’ll need to consult your data. Can you put a dollar value on how much you think you can shrink return rates? What impact does that have on customer retention? Currently, when someone goes through your returns experience, what does it do to their long-term metrics – are they more or less likely to repurchase, do they spend with more abandon knowing they can return something, or do they shop less with you because the return was a hassle?
Many ecommerce businesses can’t answer those questions because returns data remains unavailable, or exists separately to the rest of their customer data. Fixing this gap is essential for improvement, but in the immediate term, the solution is to test and learn if you can’t rely on existing data to give you answers.
You don’t need guaranteed perfect numbers, but reasonable estimates will help to make the decision about your philosophy clearer. Now you can decide a strategy: what are you willing to invest to make returns easier, and what costs are you willing to absorb? This is where your policy comes in. The policy sets out your approach to returns and defines the costs you bear from higher or lower return rates, as well as establishing how easy you make it for your customer when they want to return something.
A strategy without an owner is unlikely to work, but returns often ends up falling through the cracks. Have a team or person who is tasked with implementing your strategy, and give them the authority and cross-department reach to make it happen. Collaboration between teams is absolutely essential to making returns work for you.
The strategy doesn’t get made once and remain forever etched in stone. It’s a continuous exercise in identifying problems, seeing opportunities and paying attention to the results. For that, you need an ongoing project, overseen by your returns owner, with the right people in the room who can make changes.
For example, if marketing is promoting a discount on a product that has sky-high return rates, they need to take it out of the campaign. The buying team need to consider whether there is a manufacturer defect, whether other products might have similar issues, et cetera. The logistics team need to know that there’s an influx of returns on the way for them to process. A regular meeting that highlights these issues and addresses them keeps your strategy on track. It can also tell you when you might need to change tack and adopt a different philosophy, if the results aren’t what they should be.
Having a returns strategy is about taking a position, then measuring your performance and adapting to your customer. To do that requires up-to-date returns technology that gives you full insight into the performance of returns and their impact on your customer. Even better, it reduces your costs in the short term too.
If you need a digital returns platform on which to build your returns strategy, talk to us.