One challenge for nearly all e-commerce businesses is product returns. According to some statistics, return rates range from 25 to 40 percent. Returns hurt profit margins, especially if free shipping was already part of the deal. This creates a conundrum for e-commerce retailers to solve — how do we keep customers happy by providing an appealing return policy while reducing costs associated with product returns? Especially in an age where we are competing with marketplace no-questions-asked return policies.
Create a customer-centric policy
Some suggest the best way to reduce returns for e-commerce is to treat them as customer-centric as you would with any other aspect of your business. Statistics suggest 67 percent of customers go straight to a website’s return policy before they buy. Research conducted by UPS in 2017 found a whopping 79 percent of e-commerce customers rate free return shipping as an important part of their decision-making process. These statistics are hard to ignore.
Offering a generous return policy can be beneficial. Consider there is a segment of customers who want the convenience of online shopping but actually want to touch the products they buy. Having a less restrictive return policy enables customers to fulfil this need. Also, consider 92 percent of online buyers will shop a merchant again if the return experience was painless. In the long run, gaining a loyal customer can far outweigh the cost of a return.
However, for sellers with low-profit margins, absorbing the cost of returns might be too much. In that case, integrating other fees into the original cost (i.e. restocking fees) can help offset the return expense. Despite additional fees being added, the customer still sees a “free” return policy. Making free returns part of a company’s branding and marketing strategy can go a long way towards increased conversions. Another solution may be to offer a minimum purchase requirement to get the free shipping—possibly resulting in higher sales as customers spend a little more to qualify.
Regardless of how you design your return policy, you should make it easy to understand and place it in a prominent space on your website.
Look at the Data
While creating a return policy that is favourable to customers is necessary for today’s e-commerce environment, this still doesn’t solve the problem of high return rates. A way to reduce them is to drill down your data to identify the reasons behind the returns. Common ones include:
- Damaged products upon delivery
- Wrong item shipped
- Product expectations not met
- Miscellaneous (i.e. finicky customer or one unsure of what they want)
Many error-driven returns can be prevented by looking at your inventory management techniques. Your merchandise should be well-organized and clearly labelled, ideally with SKU product codes. Make sure you are sending the right items and they are packaged appropriately.
Once you’ve identified why products are returned, many are fixable. For instance, if damaged or wrong products shipped is a common theme, you can better your delivery process. If customers return products due to unmet expectations, you can improve your website presentation by providing clear written descriptions, product imagery and videos, along with more accurate size charts.
As technology improves at rapid rates, you can use it to bring your products “to life” and tap into customers’ senses. By doing so, you offer your customers a better experience while helping them find what they want to buy.
- Integrate chatbots to assist customers with questions.
- Use scan-based shipping labels—charges only are made if customers use the label.
- Incorporate online questionnaires, apps and other virtual tools to help customers determine, either outright or subconsciously, what they want to purchase (Shopify provides some great examples of what some merchants are doing!)
Tech has long played a role in customer personalization. Newer technologies such as apps, virtual reality and artificial intelligence provide vendors with an ability to kick personalization up another notch. While tech involves initial upfront costs, over time, it can pay itself off. When customers are provided with options that simulate the brick and mortar buying experience, it helps reduce return rates because they’ll make the right purchase the first time.
Written by Laura Gayle, Business Woman Guide.