The Cost of Complicated Customer Returns

The Cost of Complicated Customer Returns

Not surprisingly, the more users purchase items online, the higher the return rate. Experts estimate that by 2020, product returns will cost around $550 billion—75.2 percent more than only four years prior. The Wall Street Journal and the Star Business Journal found that consumers make brick-and-mortar returns eight to ten percent of the time. This number is double for online returns. During the holiday season, online return rates jump to 30 percent and as high as 50 percent for expensive items.

As a result of the high number of returns, businesses are hiring more people, increasing warehouse space, and establishing departments solely dedicated to returns. Even with the added resources, many brands struggle to keep up with the influx of product returns. A recent study found that 44 percent of distribution center managers consider returns management a “pain point.”

Holiday shoppers, in particular, are on high alert and hold higher expectations for customer service. If there’s any time for your brand to pull out all the stops, it’s this time of year. It’s not uncommon for online retailers and brands to create a returns process that is clunky and difficult to use in the hopes of reducing the return rate. However, this often leads to dissatisfied customers and reduces the retention rate.

Who Returns and Why

You likely found that you have a number of customers who purchase from your site with the intention of immediately returning. In fact, 89 percent of consumers have returned an online purchase in the last three years, and 77 percent of returns come from repeat customers.

There are three types of people who purchase items with the sole intention of returning them:

The top reasons for returns are preference-based (they account for 75 percent of all returns), meaning the size wasn’t right, the customer changed their mind, the style wasn’t right, or the product wasn’t as described on the site.

Top Consumer Returns Experience Pet Peeves

Costly Return Shipping and Paying a Restocking Fee

According to Internet Retailer, two of the top pet peeves are paying for return shipping and paying a restocking fee. Studies show that costly and complex return policies turn shoppers away—71 percent of customers who find restocking fees in the return policy will abandon their purchase altogether. When a shopper purchases an item on your ecommerce site, there are risks involved. The item could arrive damaged, it may not be as pictured, or it doesn’t fit. As a consumer, you wouldn’t want to pay a fee for an item you have no intention of keeping.

Additionally, to avoid any surprises further down the returns experience, place the return policy in prominent areas on your site, such as the homepage, PDP, and checkout page. 67 percent of shoppers check the return policy before making a purchase, so why make it hard to find?

Slow to Issue Refund

Untimely refunds to a debit or credit card is the second highest pet peeve for the consumer’s return experience. If a customer doesn’t see the credit issued to their account within a few days of the return, they may start to worry — and uncertainty isn’t conducive to repeat sales. By crediting the purchase amount back to their card right away, you’ll help to build the customers’ confidence and boost your site’s credibility.

Internet Retailer tested the return process form 32 brands and retailers. Out of the 32, 28 provided updates on the refund process once the order returned to the company. On average, the tested companies issued refunds between eight and ten days; however, six retailers took 15 days or more, and one took over 30 days. Beauty company Glossier told the tester to keep the items or re-gift to someone else and issued a full refund for the $40 worth of purchased items.

Hard-to-Reach Customer Service

17 percent of consumers name “difficulty in reaching a customer service representative for help” as one of their top pet peeves. Making a returns process as self-service as possible benefits both you and your customers. Consumers are often satisfied with the returns process when the order includes a return shipping label, a packing slip for the return, a return form, and information about the refund process.

A returned product ultimately means that at some point in the customer experience you failed. By implementing a strong and consistent communications process throughout the entire return experience, you make it more desirable for customers to with your brand or retailer in the future.

Lack of Return Options

Return by post is not the only avenue you can offer your customers. 47 percent of respondents in Internet Retailer’s recent study say they prefer to return items to physical stores. 63.5 percent of the Top 1000 retail chains offer this option.

Accepting in-store returns is a benefit to you as well. As shoppers go through your store, there’s a high likelihood they will see something else they like and make an exchange or another purchase—saving you a sale. 66 percent of shoppers will make another purchase when they walk through the door to make a return. When returning an item via post, only 44 percent of consumers will make additional online purchases.

Clunky Return Workflows Eat Into Sales

A report from the Reverse Logistics Association explains that managing the return and repair process accounts for ten percent of the total supply chain costs. And, on average, a retailer spends 8.1 percent of sales on reverse logistics (including processing damaged, unwanted, spoiled, and counterfeit goods) according to Inbound Logistics.

Over half of distribution center managers do not have the resources or ability to determine whether returned items should be sent to the vendor, moved to inventory, or discarded—which may be why returns take up to two weeks to process back into inventory. 44 percent of distribution center managers consider returns a pain point in their operations. UPS estimates that without a well-developed logistics process, high-tech manufacturers could be losing more than 50 percent of returned merchandise value. Brands and retailers that invested in improving their reverse logistics processes saw a 12 percent increase in customer satisfaction and a four percent decrease in cost.

An easy starting point to improve the returns process is by providing customers with a clear and easy-to-find return policy on the site—this will lower the barrier of purchase. According to Narvar’s recent report, a 30-day return policy is a standard benchmark, as almost half of consumers return unwanted items within the first few days after the package arrives.

Need help improving your return process? We’ve helped brands reduce return rates by as much as 40%. Feel free to reach out here.