Online shopping and ecommerce businesses were already growing exponentially in recent years, and their growth has only been further accelerated by the global COVID-19 pandemic. According to the Reverse Logistics Association, online businesses receive 3x-4x more returns than brick-and-mortar stores. So merchandise refunds should be treated more as a significant fact of life than as a side concern. Proper returns management and a well-communicated ecommerce return policy can protect your business from the threat of returns.
Not sure about how to handle your ecommerce returns and refunds? Fret not! We're going to now specifically explore what goes into making and executing a successful returns policy.
How Returns Impact Ecommerce
Your ecommerce business' return policy plays a vital role in customer satisfaction. Happy returns yield happy customers.
Returns are the new normal
After free shipping, many consumers cite free returns as the top reason that compels them to buy products online. It's no wonder all successful online retailers expend time and effort on optimizing their returns management process.
Statistics show that return deliveries have seen a 75% or greater increase in just the past four years (Statista). This number is estimated to rise steadily. Put frankly, online returns will grow as online purchases grow.
Free returns are integral to the customer experience
In accordance with the standard online retail experience, shoppers expect easy and free returns. Not having this can harm the business and affect your online store's reputation and appeal. Competitors in your industry might already be offering free return shipping with online purchases, setting a bar for customer satisfaction that you must rise to meet or risk becoming irrelevant.
Ease of return, including having pre-printed return shipping labels, whether returns can be made for full refunds instead of store credit, and whether items can be returned to brick-and-mortar locations for an immediate refund are all details that discerning customers pay attention to.
Infrastructure to support returns
To have a working returns department, just devising a return policy is not enough. To make the whole process smooth, hiring enough resources and labor must be prioritized for scalable reverse logistics management. Businesses need to hire more workers, get more warehouse space for returned inventory, and create departments to handle reverse logistics. These things constitute the necessary infrastructure for the return process. In case this becomes too much for your business, you can always employ the services of return management providers to streamline the return process if it makes financial sense for your business.
Companies like Happy Returns are solving infrastructure return problems by helping businesses like Everlane and Rothy's set up so-called "return bars" where customers can go to convenient locations to make in-person returns.
Return Rate Optimization
An acceptable, customer-centric return policy can drive your business growth. Successful businesses have a reliable and user-friendly policy for returns, which wins customer loyalty.
Putting in place a trusted customer review system can also alleviate returns. Quality customer reviews allow prospective buyers to better research the products and determine if they are a good fit for their needs.
Profitable customers return more
Businesses should also consider their returns policy as a means of acquiring more customers.
Many customers now buy with the explicit intent to return some or all of their items. The customers who return the most merchandise are often still their highest-grossing, best customers for some online retailers. According to statistics, the most profitable customers have an average of 32% product return rate, suggesting that many customers buy several options in different colors and sizes to try on, creating a sort of at-home try-on experience.
Balancing return cost vs. item value
Whether your store can offer a full return should be based on aggregate the cost of returns versus net sales for that product. It's essential to run the numbers and closely observe the relationship between the price, value, and returns of a product when determining your store's policy.
Tracking types of returners
Two types of habitual returners can exploit your store's return policy: people who wear items once before returning and people who buy multiple sizes and colors to try on before returning the majority of things. Ecommerce businesses can track these habitual customers by analyzing their previous purchase data. In some cases, it may be necessary to restrict these customers if they are causing excessive profit loss.
Establish refund thresholds based on per-dollar values
Nobody wants to deal with customers who exploit your store's returns policy and end up inflicting losses on your business. There is a variety of software available now to identify such customers. The software allows you to set a refund threshold based on the per-dollar values or the number of returned items by a customer tallied up with their total purchases. Such services use the purchase data of customers to identify a habitual returner.
Tag repeat heavy returners for follow-up with customer service
Once your software has identified and tagged the repeat returners and has segmented them as habitual returners, you can forward the customer's data to your customer services team, so they can follow up and ensure continued customer satisfaction.
Exclude repeat offenders from full refund offers
The last step in this tagging process is to exclude the repeat returners from exercising full returns and refunds. If you have software that can deal with this excluding task, great; otherwise, you will have to notify your order fulfillment and returns teams about excluded customers manually.
The obvious con to this entire strategy is that it's incredibly resource-intensive. Only the largest online retailers like Zappos can afford to use and implement such sophisticated tracking.
Promote try-on-at-home programs
To deal with the second type of habitual returner, many online stores offer a try-on-at-home program to maximize customer satisfaction. A significant example of this method is retailer Warby Parker. There is usually a small return window for this sort of program. Allowing customers to order multiple clothing items and sizes before purchasing increases the likelihood of keeping one or more things. Returns management companies like Returnly, Loop, and Return Magic can help you build out this type of try-on program.
Handling Reverse Logistics
Most retailers are not prepared to handle the reverse logistics of returns by themselves. The rise of return fraud, along with advancement in online shopping, has caused businesses to become weary of the return process altogether. But opting out of the return program is not an option. As mentioned earlier, different customers use the return opportunity for various reasons, and not offering a friendly return policy will likely harm your profit margins more than the returns themselves could. Therefore, it's crucial to have a clear-cut returns policy backed by a smooth returns process to minimize reverse logistics problems.
Clearly state your return policy to customers
The ecommerce return policy is as important as the product description. It plays well to have a clear-cut returns policy from the start, so your customers know what they are getting into. To do this, you need to develop a return policy that aligns with your business model and is manageable for you. Not every business can afford to offer free returns, especially when you are just starting out. A good return policy will strengthen your relationship with your customers and help you build a good reputation.
Design the returns process for both the customer and business
Happy returns translate into customer loyalty, which is why it's vital to devise a policy that works well for both the customers and your business. The return process should be time and cost-efficient and account for packaging and transport details in a way that ensures products are not damaged in transit.
Consider outsourcing returns
To make the returns process seamless, it's vital to choose the right services. If it is too much for you to handle returns on your own, you can outsource returns to a 3PL company. Businesses use these services for order fulfillment and also returns.
To avoid return fraud, make sure to thoroughly research and partner up with a trusted company. Possible service providers for return management are Returnly, Loop, and Return Magic. These service providers allow customers to explore the self-service online return experience. They also enable companies to engage with their customers at the point of return to improve customer experience. Although they add an extra expense, some businesses will find the convenience worth it.
Tips for Streamlining the Customer Experience
Good customer experience is the top priority of all successful businesses, and rightly so. Customers determine and drive the success of a company. For online retailers, it is essential to invest in a satisfactory return experience for the customers as well. Here are a few ways to go about it.
Make return labels easy to print or include pre-printed ones
To make the returns process smooth for the customers, include pre-printed return labels in the parcel packaging. This extra detail makes the process easier for the customers, and it streamlines the returns process for the retailer. You can include questions about the reason for the product return and use the data to better understand your customers' return-related habits. In case you do not include the returns form with the product, ensure that the return label and forms are easily accessible on your website.
State return deadlines and directions clearly
The return deadlines and directions should be mentioned on your website, preferably in the website footer and on each product page, to improve conversion rates. Most standard businesses offer a 30-day return window, but some online stores also offer a 90-day return period. The return policy and deadlines are going to be different depending on your company's products. Perishable items, for example, may not be accepted for return in some instances. If your company return policy requires original packaging and intact tags to be set along with the product, mention it in exact words and within the shipping packaging. Outline the step-by-step return process with easy-to-understand instructions. In the directions, mention details about the return label, whether it will be prepaid, whether the cost will be deducted from the product refund, or whether the customer will have to pay for it themselves.
Write a returns FAQ page
Certain things need to be made clear from the get-go to avoid any miscommunication with your customers. Imagine yourself as a customer and write a detailed FAQ page containing all possible questions that you might have while returning your online purchase. You could use focus groups to gather queries or better understand what customers want to know from your competitors' FAQ pages. Tell your customers whether you provide immediate returns and refunds and if they will get a full refund or just store credit.
Tackle these and other vital questions on your FAQ page. Keep updating your FAQ as needed, with questions that you receive from your customers.
Hassle-free communication regarding the returns policy sets the groundwork for gathering life-long customers and sets the tone for the entire post-purchase experience. If your customers want to know something about the return process, make it easy to contact you with their queries through designated communication channels. One promising way to communicate your returns policy to your customers is by linking it to several different places on your online store; so that it is easy to find.
Quick note: communication should be proactive all around, including during the shipment tracking process. Malomo helps build beautiful product shipment tracking pages that effectively cross-sell and upsell your products to your customer base.
Now that you have a basic idea of how the product return process works for online purchases, it's time to move towards integrating a return policy into your business model. Completing this step will not only increase your customers' trust in your brand but also remove a significant barrier to sales.
You need to take care of a few basic things while devising and communicating your return policy to online shoppers, which we discussed in the article. If you keep them in mind while doing business, you'll undoubtedly be successful. A good returns policy is customer-centric and easy for the customer to access and understand. Always be clear about your policy and keep things detailed.