Major e-commerce studies show a high percentage of customers - 80% in one study -say the ease of returning products is important to whether they will buy again. Studies also show a high percentage of customers are more likely to shop with an online merchant if the merchant offers “free product returns”. How well you handle returns can dramatically affect your profitability and customer lifetime value.
Understand Your Product Return Rates
To better understand improving customer service and returns, first identify the reasons customers return your products. You should also understand the typical return rates for categories, and how to develop a “reason for return” report that you can use to identify returns of products.
Some studies have shown more than half of the returns are due to errors, or problems, generated by the retailer. Some problem areas where returns can be controlled include creative, photography, and inaccurate content; carrier damage problems; picking errors; vendor supplier QA problems, etc.
Identify The Cost Of Product Returns
Returns cost more than orders. (Our article, “8 Ways To Lessen The Profit Impact of Customer Returns” will help you define the high cost of returns to your organization.)
Handle Product Returns With Care
Assessing your practices and operations practices from a customer service perspective is essential. Here are some considerations:
- Returns turnaround time. What are your standards for processing returns? Most companies set a 24-hour turnaround time as the standard. For retailers with product categories that have high return rates, it may need to be several days at peak.
- Customer communication. Communicate the receipt of return with each customer, as well as when refund/credit processing has been completed. Several retailers go so far as to send notifications and tracking for returns that are in transit, this helps to eliminate customers wondering the status of their return.
- Provide returns paperwork, labels, and FAQs. Many retailers have been streamlining the operations and reducing (or eliminating) paperwork within the shipment and driving customers online to determine how to initiate a return. This can be very frustrating for customers, consider your customer demographic, etc., and determine the best way to communicate these policies with customers. The higher the return rates should influence what documentation or instruction should go in each shipment. Make it easy and reduce the disappointment of having to return an item.
- Don’t give the customer a reason to never shop again. Recently we purchased footwear from an online retailer, the order was roughly $80. The footwear sizing ran smaller, and the retailer had not made mention of this online. When the item was returned, $10 was subtracted as a restocking fee, on top of $10 to ship back. This is certainly an example where the restocking fee will eliminate any future purchases from this retailer.
- Credit customer accounts quickly. Some companies try to manage their cash flow by slowing down when customers’ returns are credited. Intentionally delaying credits and refunds to aid your cash flow may add to customer dissatisfaction and decrease future purchases.
Address “Free Returns”
With many large e-commerce companies, there is pressure to provide “free returns” like they do. But we all know there are no “free returns”. Surveys have shown a positive impact from customers in businesses providing “free returns”. However, each company needs to determine the costs associated with these returns, as well as how these costs affect profitability and LTV.
“Keep The Product”
Efficient Multichannel Returns
- Do you have the item both in the store and the e-commerce selection? Is the product packaged differently by channel?
- If the retail and e-commerce assortment is different, store managers don’t want to have to deal with odd items and sizes. Allowing the customer to return the item to the store will mean absorbing the cost of transferring the item back to the fulfillment center.
Can You “Save The Sale”?
Before you get the return back, can you “save the sale”? Our favorite example is Crutchfield Corporation. Bill Crutchfield, president and founder of Crutchfield, Inc., the car audio and home theater retailer, learned early on in starting his business about customer returns.
Crutchfield decided to call many of the customers who were returning products to find out why. Many e-commerce businesses can’t do this today because they lack call centers and have an arm’s length approach to customer contact.
What Crutchfield learned was that the customers were frustrated by not being able to install the product in their vehicle. There were no instructions provided by the vendors or his business. He realized that he would have to invest in researching and writing installation instructions for each product in every vehicle the product would fit.
Now, Crutchfield has a database of thousands of models that are available to the customer, and that their technicians can use to talk customers through the installation and “save the sale”. These instructions are included with each customer shipment. Consider Reverse Logistics services
Third-party logistics (3PL) and specialized Reverse Logistics services can provide software and automated tracking that goes well beyond what is typically developed by IT departments internally.
Returns are an unavoidable part of e-commerce. They can cost a bundle in the short term, and if you manage them poorly, they’ll cost even more in customer trust, and customer lifetime value in the long run.