Introduction
Returns occur when a customer sends back items they purchased to the retailer in exchange for a refund, store credit, or a similar item. For example, a customer might return a shirt because it is too large or a pair of shoes because they are too tight.
Why is Managing Retail Returns Important?
Retail returns are considered a necessary evil by about 75% of retailers. They are part of the business process that is often overlooked, yet they have a massive impact on your brand. In fact, 84% of consumers surveyed by Doddle stated that the return experience is important to their opinion of the retailer.
Returns handled correctly can enhance long-term customer value and maintain revenue. On the other hand, poorly handled returns, which are easily realized, can lead to decreased customer loyalty and satisfaction.
How to Handle Retail Returns in Your Business?
This guide discusses how to craft a return policy and create an easy return process, as well as what the future holds for retail returns.
Why is Managing Retail Returns Important?
Retail returns can easily frustrate customers and lose their loyalty. 95% say a bad return experience makes them less likely to shop with the brand again. Retail returns are like a virus. They attack your profit margins, hurt customer loyalty, and threaten your business at the same time. Changes in how consumers interact with retailers and make purchase decisions have led to an increase in returned products to sellers, as reported by McKinsey. Research conducted by the National Retail Federation (NRF) indicates that $428 billion worth of products were returned in 2020, equivalent to 10.6% of total retail sales in the U.S. that year. The NRF also estimates the annual cost of returns at $101 billion. Shoppers expect fast, free, and easy returns. This alone drives retailers to do more, such as offering “refunds without returns,” which is a refund given to customers without requiring the return of products. Meanwhile, returns remain a neglected issue for retailers. A study by McKinsey showed that managing returns is not a priority for a third of retailers, and a quarter of them do not do it efficiently or effectively.
Benefits of Managing Retail Returns
Managing returns the right way can save time and money. In fact, the entire retail industry could save up to $125 billion annually by focusing on reducing returns. In addition to direct financial costs, there are also brand, customer, and environmental impacts. Customer loyalty is built through interaction, which occurs even when retailers are not making an official profit. For instance, when customers realize they can easily get their money back just as easily as they can spend it, they will shop with greater confidence and spend more. Says Sanaz Haghizadeh from Happy Returns. This creates an opportunity to either respond cooperatively and effectively by the staff or confront an angry customer who fears the immediate next steps. Which would you prefer to experience? Additionally, about 74% of consumers feel that the return experience with retailers needs improvement. Focusing on your return process can help you stand out from competitors.
Branding
Poor experiences can easily find their way to potential customers. Whether through word of mouth or a post on social media, about 72% of customers share negative reviews about poor return experiences. This affects the perception of your brand and can lead to loss of future revenue.
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Reducing the number of returns to offering flexible return policies can help you deal with these challenges and improve your brand perception. If you handle returns in a manner that engages with customers in a friendly way, you can benefit from the side effect of positive word-of-mouth from happy customers.
The Environment
Did you know that 15 million metric tons of carbon dioxide are produced through the transportation of returns each year? From packaging to transportation to energy usage, returns leave a hefty carbon footprint. By offering refunds without returns, you can reduce your impact on the environment and save on shipping costs.
Crafting Your Return Policy
It’s easy to create a return policy that states all returns must be made within 14 days of purchase and that store credit will only be issued. But the easy way doesn’t necessarily foster customer loyalty, does it? Instead, consider how to design a more strategic return policy that can help your business thrive.
How to Make Returns Easy?
Many merchants feel concerned about the idea of making returns easy for customers. “If I make returns easy, will the return rate increase and threaten my profits?” Our experience with over 100 Shopify merchants has shown that if implemented carefully, making returns easy for customers – and for you – can be very healthy for your profits.
Why? Most customers do not decide to return an item because the return process is easy. They return it because the purchase did not quite work out. The decision to keep or return an item is not significantly driven by the ease or difficulty of the return process. Customers who want to return an item but do not do so because they find the return process complicated are much less likely to shop with you in the future. Many studies confirm this, and you may know it to be true from your personal experience. For most merchants, the most distinguished customers represent a disproportionately large share of your sales. These customers typically have the highest return rates – because they love shopping with you and trying new products and styles. By making returns easy, you can increase their purchase frequency – more than the return rate – and increase their net purchases. The simplest reason: when customers understand and believe that returns are easy, they are more likely to make purchases from you and to make purchases more frequently and in larger amounts as well.
How to Make Returns Easy?
1. Automate Your Return Process
Automating returns provides a painless return experience for you and your customers, allowing your team to work on other tasks. Merchants have a great opportunity to use return applications to lighten the burden of returns on customer experience teams and provide a self-service experience for shoppers. By using advanced software, you can customize your online return portal to include all your policies and guidelines, including your return windows, return fees, final sale items, and much more.
2. Automate the Exchange Process
Reduce refunds by making exchanges as easy as possible and giving your customers many options to choose from themselves. By using software, you can offer active exchange options based on the reason for the return to the shopper, or automatically present them with other options based on size or color depending on available inventory.
3. Help the Customer Service Team Automate Return Processing
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Although automation can help alleviate the burden of returns, there are unique scenarios that often require judgment and additional attention from customer service teams. For example, you may want to make exceptions to your return policy, whether that means allowing the shopper to return an item after the specified time has passed or permitting returns that are not allowed for valued customers. Be sure to provide tools for your customer service team to manage these exceptions and a set of guidelines to follow business decisions when appropriate.
4. Offer Multiple Return Methods
Most retailers already offer multiple delivery options, including the ability to pay for expedited shipping. The same idea applies to exchanges and returns. Empower your customers by offering multiple return methods, beyond returning by mail. These options can include returning products to your stores or returning them in person to a third-party network. Neither of these options requires a box or label and both provide instant refunds or exchanges to the customer.
5. Offer a High Sustainable Return Option
Various studies indicate that consumers prefer to shop from retailers with sustainable business practices, and returns present an opportunity to go green, so you might consider offering refunds without returns for low-value items to eliminate numerous unnecessary shipments. Another great way to make your returns eco-friendly is to consolidate items into reusable boxes without cardboard at a third-party location and ship them in bulk. This method not only saves significant costs by avoiding individual shipping fees but also greatly reduces greenhouse gas emissions and fuel waste.
6. Offer at Least One Free Return Option
Shoppers have learned from the previously mentioned e-commerce giant that it is expected to have at least one option for returning an item for free, so it’s worth considering whether you can support this. We recommend offering at least one option for free in-person returns, then thinking about charging for returns by mail, as shipping costs have become more expensive.
7. Make the Return Policy Simple
With a clear policy that leaves no room for interpretation, your customers know exactly what to expect, which reduces the frequency of angry customer service calls later on. When you visualize a clear policy and make it prominent on your site, you can increase conversion rates and reduce customer churn.
8. Restrict Returns Using Basic Best Practices
When it comes to making returns easy, don’t forget to include the basic steps that will help restrict returns in the first place. For example, be sure to post clear size charts to help avoid unnecessary returns due to size – which is the reason for 50% of all returns in clothing and shoes. Additionally, it’s important to clearly identify final sale items and include customer reviews of your products to help make your customers as confident as possible before hitting the purchase button.
9. Maintain a Positive Customer Experience
One of the most obvious ways to maintain a positive customer experience is to avoid creating friction. Friction slows down customers and makes their lives harder, generally affecting their perception of your brand – and the chances of them becoming loyal customers. To keep things positive and avoid friction, follow these best practices: Make returns convenient. Avoid forcing customers to jump through unnecessary hoops to return an item. If you sell online, allow customers to make returns in-store. Train all team members to complete returns so customers can quickly locate the customer service desk. Make the return policy hassle-free. Every retailer needs a return policy to set appropriate expectations around returns and exchanges and limit risks such as return fraud – but this doesn’t mean your return policy should create additional hassle for customers. Be reasonable about the time window customers have to return items and be flexible about the documentation required (like invoices, tags, etc.). A hassle-free return policy can also help boost net profits by calming shoppers’ minds. In e-commerce, in particular, knowing that returns are easy and convenient helps alleviate customers’ hesitance, leading to more sales. Practice empathy. The biggest way to maintain a positive customer experience is simply to show empathy. What does this look like? For instance, train staff to ask how they can fix things, especially if quality or dissatisfaction are the reasons for the return. Your return policy should also be adjusted based on the product itself. For example, you might allow some flexibility for items that are hard to find the right size for (like women’s swimwear). This is especially important if you are selling these items online.
Conversion
Returns to Exchanges
Understanding where customers come from when they return an item is the first key to turning returns into exchanges.
Step 1: Ask the Right Questions
To provide the right recommendations (with the best chance of creating a positive customer experience), you need to understand their needs at a deeper level. This means asking more than standard questions like “Is there anything wrong with the item?”
Why are they returning the item? When the reason isn’t an obvious issue with the product quality, customers may not provide much detail here. But these are the vital details that enable your team to make the best exchange recommendations, so it’s important to probe enough to understand the true motivations behind the return.
What expectations was the product unable to meet? This question can help your team identify the gap between customer expectations and the actual product. This adds valuable context to understand the real reason behind the return.
How did they plan to use the product? Perhaps the product was not designed to meet the customer’s needs. This is important for your team to understand so they can provide relevant recommendations for another product that will satisfy those needs.
Step 2: Listen Effectively
Listening always seems simple, but active listening to understand (and not just to respond) is a hard skill to master. It’s an important skill you must develop in yourself and encourage your team to focus on. Here are some tips that can help you and your team work on active and empathetic listening:
Cut transitions. Pay attention to what customers are saying by ignoring transitions, avoiding multitasking, and looking at customers while they speak.
Show that you’re listening. Pause what you’re doing to listen and use body language to communicate that you’re ready for what customers have to say.
Respond. Don’t worry about crafting a response until after the customer has finished speaking. Once they have stopped, paraphrase what you heard and ask follow-up questions to ensure you understood the complete picture.
Step 3: Present Suggested Products
After asking the right questions and listening empathetically, your team gathers information about the return – vital information for a successful exchange and positive customer experience. Customers know they have been heard. They feel respected and understood, which makes them more willing to exchange and make additional purchases because they know it comes from a place of empathy.
Once you’ve gone through this process, the last thing you want is to lose customers here. That’s why you should spend enough time training your team on your products and how to present them in a way that benefits the customer above all.
Step 4: Look for Patterns
Returns and exchanges are a valuable learning opportunity for your store. Returns and exchanges can provide information about individual products that customers are returning and the reasons they are returning them. When someone returns an item, it indicates a mismatch between customer expectations and the reality of the product. By looking for patterns in the return and exchange activity of shoppers, you can identify products that lead to
Source: https://www.shopify.com/retail/retail-returns-exchanges
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