Returns and Customer Loyalty in Retail

In the retail industry, returns are a necessary evil–or so the theory goes. The truth is, returns don’t need to be a source of dismay. By understanding the intimate interaction between returns and customer loyalty, you can transform near-term pain of returns into a long-term gain for your business—a source of customer loyalty and future growth. 

In this blog post, you’ll learn about the critical importance of developing a modern returns policy, what customers expect in the way of returns, how you can mitigate the likelihood of returns, and—most importantly—how you can take advantage of returns to turn customers into loyal advocates. 

Customers won’t buy without a clear return policy

An increasing number of consumers report that they won't even make an initial purchase with a retailer unless they have complete confidence that their return experience will be seamless. In fact, shoppers seek out retailers willing to offer returns that are both free and convenient, for example:

• Home pickup
• In-store drop-off 
• Third-party drop-off
• Back-of-store drop boxes 
• Curbside pickup services, etc.

This is the case because people want flexibility and ease when things don’t work out with a purchase. 

The challenge, of course, is how do you give shoppers what they want without breaking the bank? After all, free returns are nice, but so is staying in business.

Offer free returns, but only for your VIP customers.

Not all customers are created equal—some are more valuable than others. Depending on what stage of life your business is in, you don’t need to offer free returns or other cushy return-perks to all customers. 

Instead, you can focus on rewarding your best customers (those who meet certain order-value thresholds or who buy with frequency) with the most generous return policies and processes. 

Use return perks to get customers to give a little more

Insert a little friction into the return experience (e.g., a return fee) as a way to get shoppers to take brand-friendly actions. For example, you can use “free returns” as a lever to get shoppers to sign up for your loyalty or rewards program, something you can be sure will increase their lifetime value. 

Or consider offering shoppers a 2% discount towards their next order every time they need to return an item. Little carrots like these not only help secure the initial sale but they make the customer journey smoother and increase the likelihood of secondary and tertiary purchases in the future. 

Another return perk you should consider?—Instant refunds. 

For many consumers, “getting the money back” isn’t necessarily about getting the actual cash back in their bank account or a refund issued to their credit card. Instead what shoppers are really focused on is getting access to the money they spent quickly and easily so they can resume the shopping experience. 

To ensure they spend that money with your brand only issue instant refunds in the form of a gift card that can be used for your products. Doing so saves the sale, retains revenue, and compels the customer to stay loyal to you. 

Make return updates more transparent

The days of throwing a return label in a box and hoping it makes its way back to the retailer are over. Today’s customer wants notifications at every phase of the returns journey—from the moment the item is picked up by a courier, to the moment it’s received in the warehouse or store, to the moment the refund is issued. 

Use return updates as an opportunity to build loyalty and cultivate a positive impression with shoppers by positioning yourself as a retailer committed to honesty, transparency, and always doing right by the customer. 

What you get with improved customer loyalty

Almost all retailers understand the value of increased customer loyalty lies in its ability to drive higher lifetime value (loyal shoppers spend 67% more than new shoppers) and retain revenue. But only the wisest retailers understand that stronger loyalty makes life easier in the form of more consistent, predictable sales volume, as well as leading to more referral business and improved brand recognition. Be smart—invest in developing strong relationships with customers who are submitting returns as doing so is the key to transforming them into loyal advocates of your company over time.

How to make returns more efficient

Having said all of the above, don’t settle for returns at face value. Yes, returns are an important part of the ecommerce experience, but that doesn’t mean you can let inefficiency slide. Take steps to ensure your returns process is as efficient as possible. 

For some retailers, that might mean charging customers a fee to process an ecommerce return, as doing so incentivizes  customers to be more thoughtful in their shopping process and make sure they are making the right purchase in the first place. 

For other brands, that might mean doubling their investment in product detail pages to ensure every aspect and angle of a given product is depicted with the utmost accuracy, which should minimize the need for bracketing and, therefore, returns. 

Finally, consider working with external partners (such as Narvar, of course) who possess a wealth of expertise in the realm of streamlining returns experiences. 

Your shoppers are just people

In a retail landscape where customers have more options than ever, it’s important to focus on customer loyalty. Returns are one way to increase customer loyalty, as they show that you value your customers and their satisfaction. More efficient returns can help you save time and money while also making your customers happy.

Remember—your shoppers are just people. They just want to know if things don't go right, you're going to have their back. If you always invest in your current customers, the loyalty and the lifetime value will follow.