In the early days of ecommerce, liberal return policies were critical to persuading consumers to shop online. Even today, a risk-free return policy is often the right move for a new retailer trying to convince prospective customers to try the brand or product. But most retailers don’t have to pull out all the stops, all the time. It may be more beneficial to your bottom line to tighten up your return policy, or save the most generous perks for VIP customers and high value orders.
Return rates in 2022 were 14% higher than in 2019, and those costs add up quickly. Major retailers have begun pushing back by shifting some of those costs back on customers. According to a report in The Wall Street Journal, 66% of retailers in the US charge at least a nominal fee for returns—up from 60% in September 2022.
In this article, we’ll examine the impact of returns on retailers’ margins, and the most important elements to keep in a customer-friendly return policy.
Returns undercut profit with lost sales, customer support costs, return shipping, and processing costs that run 2-3x as high as outbound fulfillment costs.
Retailers are constantly deploying strategies to minimize bracketing and reduce returns, but they remain a necessity—even in the face of fraud. Over 60% of online shoppers decide which retailer they’re going to buy from by considering their policies.
“Easy,” however, should not be conflated or confused with liberal. A liberal return policy might permit refunds on new or used merchandise within 100 days.
An easy return policy could offer the standard 30 days, along with a network of boxless, brick-and-mortar drop-off points.
Today’s customers want to control when, where, and how they return items. For retailers, the key is to merge convenience with affordability, which means digitization.
Digital return methods—from printerless to boxless returns—are up over 30% in the last two years. They make the process easier for customers, cheaper for retailers, and faster for both.
For customers, the process is simplified because shoppers initiate returns through an online portal, and have the freedom to drop a return off at a designated location (e.g, Walgreens) or schedule a home pickup.
If the retailer offers boxless returns, the customer doesn’t even have to repack the item or print a label.
For retailers, the biggest savings come from cutting costs and emissions through returns consolidation, and getting returned merchandise back into stock so it can be sold at or close to full-price.
The most important elements to include in a digital return experience are:
Estimates suggest that the average cost of a return could total as much as 15-30% of the original purchase price.
Free returns can also be dangled as an incentive to get your customers to engage in a particular way. Ways to “earn” free returns could include:
Returns are costing retailers, so retailers must train customers to stop thinking of them as “free.”
Approximately one out of every four shoppers is happy to pay for some kind of return convenience, with the most-requested service being scheduled home pickup. While returns should always be easy, zero-cost returns can be reserved for loyal customers.
Convenience has displaced cost as the determining factor in what makes a great return.
Respondents in Narvar’s latest State of Returns survey are embracing time-saving, stress-busting returns programs:
With streamlined, digital return processes, retailers can recapture about 60% of return revenue through seamless exchanges, and resell returns 30% faster. Is it time for your brand to step into the modern age of returns? Schedule a demo today to discover how digital returns can pay off.