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.
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.
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.)
Assessing your practices and operations practices from a customer service perspective is essential. Here are some considerations:
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.
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.