The burden of managing product returns is one of the most complex struggles in running an online store. Returns bog your team down with a lot of manual processes, they introduce friction to the ecommerce customer journey, and they seriously mess with your business metrics.
But, they’re also a natural part of a healthy DTC ecommerce business. Smart retailers embrace returns as another valuable touchpoint in the buyer’s journey instead of wishing they’d just go away.
You will never eliminate product returns, nor should you try to. Instead, you should take steps to ease the friction in your customers’ returns experience, reduce the bandwidth required from your customer support team, and use returns data to optimize your business.
Keep reading to learn how mastering your ecommerce returns process can transform it into a valuable business opportunity.
According to the 2024 Consumer Returns in the Retail Industry Report, total returns for the retail industry are projected to reach $890 billion in 2024, accounting for 16.9% of annual sales. Ecommerce businesses often neglect the costs of return shipping, physically processing returns, the costs associated with storing returned products, and the potential value lost if the products can’t be resold.
Retailers ultimately decide whether or not customers pay for returns shipping. Competitive pressure pushes many to offer free return shipping to ensure customer satisfaction.
And it makes sense; ecommerce stores increase customer loyalty by allowing customers to return items, and more liberal return policies tend to increase the likelihood of customers making a purchase. And, once they have the item, most customers don't want to go through the hassle of the online returns process anyway. Additionally, we’ve found that by extending their return window, retailers can decrease their return rate.
By reducing the perceived risk of buying, you may accomplish more than simply nudging purchases — you just can reduce your ecommerce return rate as well.
Managing returns takes a lot of man-hours, especially if you aren’t using robust inventory management and returns management software. They quickly burden your team with manual processes and back-and-forth communication with shoppers.
The labor costs of receiving a return often far exceed those for order fulfillment. The forward supply chain is relatively simple: products are pulled off the shelf and shipped out.
For each return that comes back, the warehouse team must open the box, identify the product, grade the condition of the return, place the product in the appropriate bin, restock the inventory for resale if applicable, and update the customer service team on the status of the return.
Meanwhile, your customer service team is busy managing customer requests—including generating return merchandise authorizations (RMAs), return labels, refunds, and store credit—while also checking various ecommerce systems for customer notifications. This is where integrating a returns management system into your unified ecommerce tech stack comes in handy to streamline the returns process.
A smart returns process automates some of the most intensive tasks, reducing the steps in the returns workflow. This results in more efficient operations for the retailer, tighter inventory control, and a better experience for the shopper.
Your success depends on having inventory available to sell. Especially if you sell seasonal products, the last thing you want at the end of the season is a warehouse full of piles of unsold merchandise.
When as much as a quarter of the products you’ve sold find their way back as returns, that pile can accumulate rapidly. And retailers have to move quickly to recover the value of products. Efficient warehouse operations, including quickly grading returns and restocking products back into inventory, is crucial.
With every minute sitting in the warehouse, and each touch from a worker, that product is costing you money. Because of this, you may be exhausting as much as 10% of your sales revenue by repeatedly handling returned products.
This is even more significant when your sales are distributed through a variety of channels including marketplaces like Amazon or Etsy as well as your own ecommerce website. Fully integrated multichannel inventory management makes all the difference.
But handling returns expediently isn’t just for the retailer; it’s good for the customer, too. Customers don’t want to wait for their exchanges or refunds, and you don’t want to sit on returned items. An efficient returns process champions both the customer experience and operational flow.
Returns data is a powerful tool to feed optimization efforts that can reduce your return rate in the future. General return reasons can quickly identify widespread quality issues or if a product tends to skew larger or smaller than customers expect.
Combined with the open-ended feedback of return comments, you can swiftly spot points of concern, and then zoom in at the exact issues your customers are experiencing. Information like this has helped numerous retailers to quickly identify precise product issues or website issues that are causing confusion.
Returns data is the fuel for improving your return rate, whether through product improvements, sizing corrections, or adjustments to your website and product descriptions. It’s a wealth of actionable information that largely has yet to be harnessed.
Returns are indicative of the customer experience and can impact how likely a shopper is to purchase again in the future and their customer lifetime value (CLV).
Each situation requires a different follow-up and engagement strategy. If a customer returns a product because it was too small, she probably just wants to get the next size up. If she returns a product because there was a quality issue, she might never shop with you again.
Additionally, you can use returns data to spot cases where customers order multiple sizes of the same product. This allows retailers to monitor those shoppers to combat retail fraud, and, more importantly, to look at what sizes they bought versus which they returned.
Returns data can be leveraged to identify relationships among products, segment customers by their purchase patterns for marketing strategies, and inform future initiatives and outreach. Ultimately, the goal is to drive purchase velocity and increase order value.
Returns cost retailers billions of dollars annually and show no sign of slowing down. Mitigating these costs is key to survival. Done right, a good returns management process can build trust and customer loyalty.
Smart retailers are approaching returns as an opportunity to improve their shopper experience, increase the efficiency of their operations, and optimize their marketing material to avoid future returns.
By improving the process with technology like automation, seamless integrations across all your systems, and real-time reporting & analytics, you can focus on growing your business instead of being bogged down with returns.
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