How Retailers Can Take The Pain Out of Customer Returns
By Pamela N. Danziger | Nov 19, 2019
Retailers are gearing up for a record-breaking holiday this year, but that will also mean record-breaking returns come January. EMarketer predicts that total U.S. holiday retail sales will cross the $1 trillion threshold for the first time in history.
Returns are an inevitable cost of doing business, to the tune of some $400 billion annually or roughly 10% of all retail purchases, with the rate of returns for online purchases considerably higher at 30%.
That is throughout the whole year, but for holiday gift purchases, return rates are even higher. For example, WalletHub found that 34% of the consumers surveyed this past January planned to return gifts received over the holidays, with over two-thirds (68%) planning to return clothing.
Since Deloitte predicts that online purchases will account for 59% of consumer holiday spending and clothing is on the top of people’s gift list, retailers will face a deluge of returns come January.
To help retailers turn the necessary evil of returns into a business-building good, Narvar, the customer experience platform used by over 650 international retailers, including Levi’s, Bose, Warby Parker, LVMH, and Anthropologie and other URBN brands, has released a new study entitled “The State of Online Returns: A Global Study.” All told, 3,500+ consumers in the U.S., U.K., France, Germany, and Australia were surveyed to find out the pain points in their returns experience.
While this study ostensibly is intended for online retailers, its findings apply to brick-and-mortar retailers, too, since more online purchases are being returned to a physical store. Buy-Online-Return-In-Store (BORIS) is the flip side of Buy-Online-Pickup-In-Store (BOPIS) and just like BOPIS, the rates of BORIS are growing fast. In 2018 some 38% of retailers reported an increase in BORIS returns.
Stressing the importance of making every touch point with the customer an exceptional experience, even returns, Elain Szu, Narvar’s vice president of marketing, walked me through the survey results.
“Retailers need to create beautiful branded experiences all along the customers’ journey, including when they need to make a return. It allows the brand to encourage loyalty,” she says and challenges retailers, “How can you create that seamless consumer experience and not make the customer the victim of your own logistics challenges?”
Returns perception may not match reality
Overall, Szu is happy to report that a majority of consumers (67%) believe their recent online returns have been easy, but that finding is strongly skewed by their perception that it is easy to return to Amazon, which commands about 50% share of the e-commerce market.
However, the reality is Amazon has a lot of friction in the returns process, number one being the need to print out a return label. “Amazon is worse across the board than non-Amazon brands,” Szu says, referring to the multiple pain points identified in the study, such as printing a return label, needing return authorization, scheduling a pickup and finding a box or envelop to return in.
Amazon created the perception of a frictionless return process from of a high-friction reality by consistently communicating the status of a return. “Amazon does an excellent job of being transparent about the status of returns. It does a good job of giving the consumer information when the item is received and a refund issued,” she says.
On the back end Amazon has created a supply chain and logistics system that optimize the returns process to reduce costs and create efficiencies. This has given it the edge when it comes to completing the circle for the customer and perpetuating that friction-free perception. This is an opportunity for other retailers.
“Retailers can shift that perception to be better aligned with the reality by processing returns faster and keeping the customer in the loop,” Szu advises.
And that perception can also be helped by telling customers in advance about the simple, easy returns process, like free shipping.
“Retailers need to surface returns information early in the buying journey, such as on the home page or product page, not just on the return policy or FAQ pages,” she continues. “Free shipping is the number one reason why people feel confident to make a purchase in the first place. Retailers don’t want the returns policy to be an obstacle to the customers’ purchase.”
Gift returns leave much to be desired
Not unexpectedly, gift returns are fraught with more returns issues. “Returning gifts is not an experience people look forward to,” Szu shares. “But by making it simple and easy – a customer experience in the true sense – retailers have an opportunity to make a new customer.”
That is because, through the experience of gifting, a retailer has an opportunity to engage two potential customers in a single transaction – the customer buying the gift and the recipient who receives it.
“Given how high customer acquisition costs are for brands and retailers, the most critical thing for anyone is to drive repeat business in order to build up the customers’ lifetime value. If the returns process is difficult, you’re four-times more likely to lose a new customer,” she explains.
Easy returns make for more exchanges and repeat customers
A poor return experience can mean the difference between getting the customer to exchange one item for another or losing them altogether.
Among the top reasons for switching retailers after an exchange is a bad experience (28%), and the original retailer didn’t make it easy to make the exchange (15%). New customers, for example gift recipients returning an item to a new retailer, are more sensitive to a bad returns experience.
For a purchase conducted online, having a physical place to accept returns (BORIS) adds greatly to customer satisfaction and it is getting easier. Amazon now accepts returns at Kohl’s and in selected Amazon Hub Locker locations. Happy Returns, which recently partnered with PayPal, offers return locations in various malls across the country. And Narvar offers a concierge service for its retailing partners to receive returns in Walgreens stores or selected Nordstrom locations.
While the Narvar survey finds consumers are not widely using BORIS options yet –only 16% returned their most recent online order to a drop-off location, and 10% returned to store – it represents a significant advantage to customers who like the experience of getting an immediate refund. It also takes away their concern that the return will be lost in the mail.
And for retailers, another big plus is that once a return consumer is in the store, they are likely to buy another item. “Retailers get another chance to make a sale [with BORIS], and they also get the package back about 32% faster, giving them a huge advantage to potentially resell that item,” Szu says.
Many happy returns
Just as retailers need to change the customers’ perception about the ease of returns, they also need to change their own perception of returns.
“There is this inherent tension between how retailers look at returns and how the customers do, “Szu says. “Retailers want to reduce the rate of returns and customers want more return options. But in the end what retailers really want is to drive as many people as possible to come back and make another purchase. And that means you have to make returns easy.”
This is especially critical for fashion retailers where customers are likely to order multiple sizes, called bracketing. “Over the three years we’ve done this survey, we found that customers are increasingly buying multiple versions of the same item. It was about 40% in 2017, and now it is at 50%, so returns are inevitable. Customers are using their homes as a fitting room,” she shares.
Szu concludes, “What is really most important for a retailer: to reduce the return rate or increase the likelihood of repeat purchases? If you make returns seamless for the customer and create a reverse logistic system where you can process returns more efficiently and at a reduced cost, you can encourage your customers to buy more, return more, and as a result, have a more loyal, repeat customer. Easy returns are good for business.”
Article was originally published here.