The state & future of returns: A Coresights Conversation with David Sobie
As retailers balance surviving COVID-19’s impact on their business with considering more proactive opportunities, one thing is clear: eCommerce is gaining traction. And more eCommerce means more returns.
How can retailers respond—now and in the future—to address the associated high return rates and costs?
We were honored to explore this and other questions when Happy Returns CEO and cofounder David Sobie joined Coresight Research Senior Analyst Steven Winnick for a Coresights Conversation earlier this week. They discussed the pandemic’s impact on retail’s post-purchase landscape, what the future of returns looks like, and best practices retail professionals like you can implement in your organization today.
Audience polls indicated that reducing costs is the most business-critical priority, or one of the top priorities, for 92% of attendees. Nearly 70% of respondents were Director+, representing eCommerce, finance, marketing, and supply chain departments at retail organizations of varying annual revenues.
The following is a quick Q&A recap of the conversation.
Steven Winnick: Due to COVID-19, eCommerce sales are accelerating even faster than we projected. Increased online sales usually lead to increased returns, so how are you working with retailers to help them facilitate the returns process?
David Sobie: The biggest impact to our business is the closing of non-essential retail, which also means the temporary closure of our Return Bars inside those stores. We’re spending our time and energy on the software side of our business, which powers the returns portals of retailer websites to intelligently promote exchanges.
If I need to return a shirt that’s too small, our software says, “This shirt is available in the next size up, so let’s put it in front of David, and make it as simple as possible for him to say ‘yes.’” It’s really about removing friction on the front end to promote exchanges, so that the retailer gets to keep the money.
In an environment where customer acquisition costs are going through the roof because everyone is competing for the same shopper through the same channels, you just can’t afford to lose customers because of returns.
Now more than ever, retailers are thinking about survival, and survival means cutting costs. Anything that can be done to retain more revenue and avoid returns is great. That’s why we decided to offer a free trial of our software, and low carrier rates, for two months to any retailer that uses BigCommerce or Shopify.
Steve Winnick: Speaking of cutting costs through low shipping rates, can you explain how that works?
David Sobie: Our reverse logistics process is done through common carriers like FedEx, which we use to ship large quantities of merchandise from our in-person Return Bars. We also manage the returns by mail for dozens of different retailers. Because we aggregate all of that shipping, we qualify for lower carrier rates than an individual retailer could on their own. It’s just the power of purchasing in bulk, essentially.
We’re able to extend those rates to our customers to provide them with a cost-savings opportunity. The nice thing about those savings is they’re instant. In many cases, the retailers aren’t changing anything. It’s just about choosing which shipping account they print labels from, and those savings drop immediately to the bottom line.
Steve Winnick: What are some of the things that you think retailers may not understand about returns?
David Sobie: The biggest misconception is seeing returns only as something that comes after the transaction. The reality is returns are not just about post-purchase. They actually impact so much upstream, including whether a shopper that you potentially paid to acquire ever shops with you again.
Studies show that 85% of shoppers check the return policy before purchasing. Why? They’re trying to anticipate things like, “If this doesn’t fit, or if this item that I bought on a small phone screen doesn’t look the same when I get it, how painful is this going to be for me?”
The biggest misconception is thinking of returns only as something that comes after the transaction.
Returns also have a major impact on customer retention. Dozens of studies keep reaching the same conclusion: If a shopper buys something from you and has a bad experience returning it, they’re never shopping with you again. In an environment where customer acquisition costs are going through the roof because everyone is competing for the same shopper through the same channels, you just can’t afford to lose customers because of returns.
Steve Winnick: What are some of the main pain points that both consumers and retailers face when it comes to returns?
David Sobie: On the shopper side, a pain point we hear about frequently, and that our software attempts to address, is this idea of an exchange. Online exchanges often involve two transactions: “Ship the item back to us, and in two to three weeks you’ll get your money back. But in the meantime, please spend more money with us to buy the thing you actually want.” That’s barbaric. Nobody wants that. That’s why our software offers one-click exchanges, which suggest a new item to a shopper based on why they said they’re making the return. One click, and they’re done.
The most recent focus is eCommerce’s huge impact on the planet. All of these cardboard shipping boxes are generating a ton of greenhouse gases. So to address this, we aggregate items to create fewer shipments, and we ship in reusable totes that can be reused upwards of 100 times.
Retailers often tell me, “You want a really happy return? Just make this problem go away.” Well, we’re not magicians, but we can certainly help you turn those returns into exchanges. That’s the only way we can make them go away and retain that revenue.
Retailers also want to improve the shopper experience, and to lower the cost of returns. And the most recent focus is eCommerce’s huge impact on the planet. All of these cardboard shipping boxes are generating a ton of greenhouse gases. So to address this, we aggregate items to create fewer shipments, and we ship in reusable totes that can be reused upwards of 100 times.
Steve Winnick: You just mentioned aggregating returns and sustainable packaging. Do you see any other trends coming out of the pandemic that will impact the future of returns?
David Sobie: I think the biggest impact COVID has on retail will be accelerating a push to eCommerce. Things that we used to buy in-person, we will now find easier and safer to buy online. More eCommerce means more returns.
In an environment where retailers are expected to foot the bill, there will be far more focus on cost. Retailers understand they need to offer a free return option, so they’ll accept free returns in their stores or our Return Bars because it’s cheaper—and they’ll start charging for returns by mail again.
That trend will also accelerate the idea of returns to a third-party where you gain cost savings through aggregation, as well as the sustainability benefits we discussed.
Promoting exchanges in one transaction will also become table stakes, and software is the way to do that. No one wants to call customer service or convince a store associate to accept an item back. Everyone would prefer a self-service experience that intelligently promotes an exchange in the same way an associate would during an in-store return.
Steve Winnick: To that point, in addition to customer service, which departments within retail organizations play the biggest role in innovating returns?
David Sobie: This has changed a bit over time, but we used to come in most frequently through marketing and customer experience, who wanted to take return pain points and turn them into something delightful. Over time, and especially now, we see finance teams driving this because free by-mail returns are no longer sustainable while we’re fighting for survival. They know they want a free return option, though, so they turn to a third party network. Plus, they like the idea that if you make it easy to exchange, their exchange rate will go up.
Over time, and especially now, we see finance teams driving this because free by-mail returns are no longer sustainable while we’re fighting for survival. They know they want a free return option, though, so they turn to a third party network. Plus, they like the idea that if you make it easy to exchange, their exchange rate will go up.
Customer experience and marketing are certainly involved, and in a way that may seem counterintuitive. No retailer wants to promote their return policy, but our retailers have found that when they make returns easy, shoppers are more likely to buy and even try categories they haven’t tried before. Their order size increases.
When you think about the success stories in retail right now—Zappos or Amazon or Nordstrom—what’s the common theme? They’re all putting the customer experience first. Everyone has a story about how easy it was to return there. It’s all about removing that friction to create loyalty. Our goal is for every marketing team to update every website in America to say “Free shipping and Happy Returns,” because Happy Returns means “problem solved, friction-free.”
Steve Winnick: You mentioned some of the characteristics of a great returns experience. Can you share a real-life case study or best practice from your experience?
David Sobie: I’d encourage anyone who’s interested in learning more to visit the resources section of our website, which has some great case studies.
There’s one about Rothy’s, which is a fast-growing shoe & accessories business out of San Francisco that’s pioneering retail sustainability. They increased their exchange rate and reduced costs—while making their supply chain even more sustainable—with our software and reverse logistics.
Men’s t-shirt retailer Cuts Clothing also went on record with how they not only reduced costs with Happy Returns, but doubled their exchange rate above two times the industry average.
And Draper James, Reese Witherspoon’s apparel line, shared the results they produced by using returns as a way to create consistency in their exchange and return process across their online and brick-and-mortar storefronts.
We also have a blog series that is all about COVID-19.
One shares what Happy Returns is doing as a business right now to take care of our customers and Return Bar partners.
There's also best practices for operation leaders to reduce costs during the pandemic.
And eCommerce tips to increase sales during this time, as well.
Like everyone, we’re adjusting to the new world. I certainly wouldn’t pretend that we know all the answers. We’re just trying to provide tips that we have observed that seem to be working, and hopefully there’s some utility in those.
Watch the complete Coresight Conversation recording here.
Caitlin Roberson
VP of Marketing
Caitlin Roberson is the Vice President of Marketing at Happy Returns. Previously, she served as Director of Enterprise Marketing at Lyft and Partner at top-tier venture capital firm Andreessen Horowitz. Before that, she started and sold a content marketing agency.
