Best Practices from Renewal Logistics:
How to Handle Rising Customer Returns
Customer returns constitute a big problem for those in the ecommerce space.
In 2020, customers returned $428 billion worth of merchandise, equating to over 10 percent of total retail sales. For online retailers, the picture is even grimmer. About 25 percent of all items purchased online were sent back.
The supply chain process that brings products back into the inventory of a retailer’s warehouse is known as reverse logistics. The reality for ecommerce businesses is that customers expect a seamless and oftentimes free returns process to be baked into their overall shopping experience.
As a small business owner, without proper data and oversight into your reverse logistics process, this could lead to lower profit margins, lower customer satisfaction and even threaten your overall brand equity.
Despite the state of the industry, returns don’t have to be a major headache for your business.
We’ll show you how to optimize your businesses returns and reverse logistics processes and share strategies to reduce customer returns.
What You Need to Know:
Why Do Customer Returns Occur?
Consumers are generally more inclined to return purchases made online. According to Barclaycard research, 30 percent of shoppers indicated that they over-purchase and then return unwanted items deliberately while 19 percent admitted to ordering multiple versions of the same item, only deciding to keep some of the merchandise post-delivery.
The first step to understanding your returns process is figuring out exactly why customers are not keeping their orders.. Could the fault lie with you?
Issues such as defective merchandise, items being incorrectly described or missing or damaged products could be indicative of a larger issue in your supply chain. The most common type of return is often consumer preference-based (i.e. item is the wrong size or the buyer simply changed their mind.)
Return Rates By Industry
Return rates tend to differ across different industries. Apparel and houseware/home improvement items havethe highest rates, with about 1 in 10 purchases returned. This is followed by footwear, with 9.1 percent of items returned, sporting goods at 7.6 percent and beauty at a relatively low 4.3 percent.
Keep in mind that even a slight shift in these return rates can have a big impact on your bottom line.
Consider the missed cost opportunity when ensuring a returned product is inspected, handled and prepared for resale. Returned items can potentially devalue the longer they sit in your inventory. According to research firm CBRS, apparel can devalue at a rate of 20 to 50 percent over eight to 16 weeks, depending on the discount or markdown strategy.
Renewal Logistics Advice
Managing Customer Returns: Strategies and Top Tips
When it comes to managing returns, you have options.
Customers nowadays expect the return process to be seamless and include a full refund.Here are steps you can take to minimize the disruption and loss of profit to your business.
1. Invest in Specialized Software
Return management software can help you automate parts of the complicated reverse logistics process and save you money.
Popular options include Happy Returns, which covers all aspects of post-purchase and maintains a network of over 2,600 in-person return drop off locations, and Returnly, which includes fully brandable end-customer touchpoints.
You might also look into any existing warehouse management software to see if it can handle returns. Those features may currently be available to you but they may not currently be utilized.
Did you know that there are actually federal laws governing returns?
In the U.S., retailers must accept back defective merchandise and allow customers at least three days to change their mind about products with a $25 minimum price threshold. Take the time to research return laws by state and ensure you are applying them in the locations you conduct business.
3. Gather and Implement Data-Based Findings
In a 2019 report of retailers, a shocking 38 percent of respondents said they had no visibility into return and that they just “show up.”
You cannot improve your reverse logistics process, or understand where you can save money if you don’t know what the underlying problems are in the first place.
To understand the reason your customers make returns, you will need to invest in tools that gather customer data when returns are being processed. From a business standpoint, , invest in tools which track the costs and losses connected with each return. Predictive analytics and rigorous data collection can unlock the full value of returns management and prevent future returns.
4. Coordinate Your Teams
Many businesses often don’t assign one single team ownership over return operations. Ensure your merchandising, marketing, finance and operations teams are working cross-functionally to eliminate pain points and streamline the movement of returns.
5. Make a Plan to Tackle Return Fraud
It’s an unfortunate reality retailers have no choice but to deal with: “serial returners,” or customers who request chargebacks or multiple returns in bad faith.
These behaviors can range from minor annoyances to out-and out-fraud. You must define what constitutes return fraud for your own business and develop a system for identifying bad consumers. A detailed return policy and chargeback fraud protection on your website can help protect you from the worst of these offenders.
6. Outsource to a 3PL Provider
Third-party logistics (3PL) providers like Renewal can handle the entire order fulfillment process, including returns.
Our full suite of reverse logistics services include returns management, upcycling and downcycling, refurbishment, custom packaging, relabeling, retrimming, and more. If you find yourself overloaded with merchandise and with infrastructure unable to keep up with growing demand, a 3PL provider can help you manage your entire fulfillment and distribution network, freeing your time to focus on other facets of your business
How to Reduce Customer Returns
The end goal for any business should be to reduce returns and losses. Fewer returns means happier customers and increased profits. Here are some of the best and most innovative strategies we’ve seen successful retailers utilize to prevent returns.
- Ensure product information is detailed. Include all relevant product information such as weight and dimensions, materials used, care instructions, and sizing guides. This reduces the chance that an item arrives differently than expected.
- Innovate your ecommerce website with size recommendation tools and/or AR/VR that allows customers to “try on” and interact with products before purchasing.
- Ensure your return policy is clear. Build trust with your consumers by having a return policy that is clearly stated and simple to find in order to improve the customer experience. Always include a clear timeline and deadline for all returns.
- Take steps to ensure items are packed and shipped securely. Make sure items are wrapped in protective materials and labeling is accurate.
- Inform customers about the status of their return. Offering tracking numbers and an ETA on refunds is an excellent way to increase your brand’s reputation and trustworthiness.
- Re-engage customers after they’ve made a return. If the process was smooth on their end, there’s a good chance they might still be interested in shopping with your business. Recapture their business with promotions such as free shipping or a discount code towards their next order.
- Review and update your return policy on a regular basis. Ensuring your return policy is up to date will help to avoid any losses to your supply chain.
Investing in Returns Management
A straightforward return process is key to any ecommerce business. Customers clearly rank this as an extremely important factor in having a positive experience with your brand.
A 3PL can help implement the returns process for your business. When it comes to returns, we’re pleased to offer a wide variety of custom solutions that can meet your business where it’s at and scale alongside you as you grow.
If you would like to learn more about our returns management services, we’d love to chat with you.