What is the biggest mistake in retail and ecommerce?

What Is the Biggest Mistake in Retail? A Terrible Return Process

Retailers love to focus on the first-impression they make with shoppers pre-purchase. While doing so isn’t a bad idea, it does leave retailers vulnerable to making the biggest mistake in retail. 

So, what is the biggest mistake in retail, you ask?—It’s simple:

A terrible returns process. 

This is especially true in the context of ecommerce. A retailer can operate a beautiful website with exceptional product detail pages, endearing customer testimonials, and a seamless checkout process, but all those positives can be overpowered by a turbulent returns process. 

Put another way, if a return goes off the rails, that customer isn’t coming back.

What are returns?

At its core, retail is a simple, contractual process—the customer pays money (valuable consideration) and receives goods in exchange. When retailers extend a return policy to shoppers, they’re offering a legal provision that allows the customer to rescind the contract within a certain time period (or under specific conditions).

In the United States, only 13 states require retailers to notify customers of their return policy in explicit terms. However, because of ecommerce’s universal reach, the policies of those few states are essentially applied across the nation—every retailer engaged in ecommerce must publish their return policy for customers to review. 

The impact of a bad return experience

Consumers who endure a bad returns experience are 3X more likely to abandon the retailer and damage that retailer’s Net Promoter Score. Compare that to the 95% of online shoppers willing to buy again from retailers with a good  returns experience.

Those numbers make a huge difference in terms of profitability and growth in retail, especially when you realize:

  • Acquiring a new customer costs 5X more than retaining an existing one. 
  • Retailers should strive to achieve a per customer lifetime value that’s 3X the cost of acquisition. (The average CAC in retail is $10, so the average retailer needs to make a net profit of $30 per customer to have a sustainable business model.) 
  • Increasing customer retention by as little as 5% can increase profits by more than 25%.

What makes a great returns policy?

There is a huge difference between what retailers are required to accept in the way of returns, and the generous return policies that are the industry’s gold standard. 

Retailers must weigh everything from return window duration, to free shipping, to offering refunds versus store credit, against their business interests. 

While smaller retailers might struggle to support a 60-day, Give It A Wear policy like Athleta or a Make Our Customers Happy policy like Nordstrom, they can still provide things such as free in-store returns or free shipping for returns submitted within seven days of purchase. The most important thing to remember is this—implementing restrictive return policies as a way to cut costs is a bad idea in most instances.  

Suggestions to improve your return policy

Did you know that 60% of consumers will check the returns policy before making a buying decision? Unambiguous return policies eliminate shopper uncertainty pre-purchase and set crystal-clear expectations for processing returns post-purchase. Here are three suggestions for improving your return policy.

Cut the return window

Long return windows are great for shoppers but tough for brands. Strike a balance by segmenting customer audiences—set a shorter return period for non-VIP customers so you can mitigate the financial impact of outstanding returns.

Highlight your return policy 

Display your return policy with prominence. Doing so helps customers feel more educated and empowered when purchasing, which reduces return volume. 

Go beyond free shipping

Claw back the cost of processing returns by upselling shoppers on premium return conveniences such as curbside dropoff, third-party networks (e.g., a UPS store), at-home pickup, and more.

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