According to a 2015 report by retail analyst firm IHL Group, retailers worldwide lose a staggering $1.75 tril- lion (with a “t”) annually from the cost of overstocks, out-of-stocks, and returns. Returns alone make up
$642.6 billion of this number.
So how marketers first work to prevent and later deal
with returns can have a major impact to the bottom line.
A marketer’s return policy could be costing it even more
in terms of lost sales. According to an analysis of more than
20 million shoppers by Granify, a software-as-a-service
(SaaS) consultancy, a strong return policy is the most important decision-making factor for online shoppers of clothing
The study also found that, in many cases, a solid return
policy and positive customer reviews were of more importance to customers than price. Several reasons lead to
returns, but the bottom line is consumers need to know a
clear path to making a return before they even hit the “buy”
button on their shopping cart.
In the months ahead, shipments will begin to soar as high
as Santa’s sleigh in December. And, as soon as 2017 rolls
around, returns will begin to climb just as high. But fear not
— there’s potential “gold in them hills” of returned boxes.
Here are some key objectives to consider for your return
policies that may help you avoid a holiday hangover:
1. First, understand the “true” cost of returns. Setting up a
return and refurbishment process starts with calculating
all costs. If you underestimate your true costs, you may
think that you can sustain a higher level of returns and
still achieve your financial goals. Be
sure to consider all key cost elements
in a return: customer service, shipping/
receiving, processing returned goods,
refurbishment, recycling product, dis-
posal of returned items, and storage.
2. Have a well-organized mechanism
for feedback and goals for ongoing
process improvement. The basis of a
returns program must incorporate an
understanding of why returns occur.
Buyer’s remorse is always a contributing factor. Often, products do not
meet the customer’s expectations.
Think about the expectations you
set with the customer. This includes
product promises, item availability,
order processing time, and shipping and delivery time.
Your business can refine the product promise message
to more accurately shape the customer’s expectation.
A good order management system allows the customer
service agent and consumer using the shopping cart to
know whether or not the product is in stock. A fulfillment center capable of processing orders quickly reduces time from order to delivery. Geographic location
can reduce time in transit and lower shipping costs.
2. Create and maintain satisfied and loyal customers.
The level of customer satisfaction and loyalty are key
elements in a returns strategy — start with your strategic intent. Several options exist when it comes to
handling customer return requests:
a. Just keep it: For low-cost/low-value items, it’s
often cheaper to allow the customer to retain the
item, avoiding physical returns.
b. The customer pays to return: This is the most
prevalent methodology. However, consider add-
ing a spin to it. Often, it’s less expensive for the
marketer, especially via a fulfillment partner, to
transport a returned package. As such, offer your
customers a prepaid shipping label for a fee that’s
a win-win for all parties. The customer will pay
less and avoid the hassles of shipping a return.
c. Free returns for the customer: This one is obvi-
ously the most favorable for the customer but can
be difficult for most retailers to entertain. If this
method is chosen in order to score points with
the customer, be sure to initiate the return via a
return label program at optimal pricing vs. reim-
bursing the customer at retail shipping rates. This
is a “gold in them hills” option because everyone
is happy and the marketer can introduce it only
after the save-the-sale attempts have failed.
By controlling the return method, marketers proactively
can notify the customer of the return status, dramatically
reducing customer service calls. Techniques include e-mails
confirming the package is in the mail stream and on its way,
when it arrives at the warehouse, when it is processed, and
when the credit or refund is issued.
All of these actions contribute to customer satisfaction.
And they reduce customer service costs. At the end of the
day, you want to build loyal customers that can communicate
the positive experience you provide — thus creating trust
with new customers. ;
Returns Are Piling Up, but
There’s Gold in Them Hills!
By Ayal Latz