While historically the topic of returns has widely been regarded as an afterthought by retailers within the context of their overall supply chains, the pandemic-fueled surge in e-commerce transformed it into an issue that can no longer be ignored. Total industry returns for merchandise in 2023 was $743 billion, or 14.5% percentage of sales. That means for every $1 billion made in sales, on average, a retailer will incur $145 million in returns.
It’s critical that retailers understand and harness the power of building a customer-centric returns experience to be successful and protect their bottom lines. In fact, a staggering 96% of consumers reported a good returns experience would lead to repeat business. So, how exactly do you foster a positive returns experience to supercharge brand loyalty? The answer can be boiled down to five key steps.
Determine the Right Strategy for Your Business
All returns policies are not created equal. Many retailers rush into a returns policy before performing due diligence to guide the strategy. For example, will you provide free returns? What will be your returns window? Why? Questions like these are critical to consider, and the right answer can vary greatly depending on your brand’s values, goals, and products.
For instance, are you willing to completely cover the financial cost of the return to enhance customer satisfaction and loyalty? Or would you prefer to introduce a flat fee or variation in price based on item size to avoid shouldering the full shipping cost? Many of these answers will be influenced by your product. A free returns policy may make a lot of sense for one retailer, but it could become an extraordinary cost center for another depending on your niche (for example, weighing the cost of shipping a sweater vs. big, bulky appliances). Some retailers may even opt to let customers keep unwanted items and ship them a new one based on cost analysis (in other words, if the estimated charges for the return will exceed the value of the item).
As another point, one brand may opt for a more generous returns window while another may shorten to enact a sense of urgency. An apparel company may have a shorter 30-day returns window vs. a more lenient 90 days due to the seasonality of its product that renders merchandise essentially obsolete once the weather changes.
Gather the necessary stakeholders to weigh the pros and cons (preferably tapping into historical data on customer returns trends) to develop a strategy that best aligns with your business and customer values. Once established, ensure you clearly communicate your returns policy with concise directions that are easy to find on your website and/or packaging.
Offer Easy-to-Initiate Returns
No matter your strategy, providing an easy-to-initiate returns process is critical. Today, it’s becoming standard practice to initiate returns through a self-service portal rather than the traditional method of including a label in the packaging to streamline the customer experience.
Because more and more consumers do not have access to printers in their homes like in the past, retailers are largely moving to a 100% paperless experience. Rather than requiring consumers to print a label after initiating a return via an online portal, brands are increasingly issuing customers a QR code they can show at the drop-off returns location. In many cases, the consumer does not need to supply their own packaging either as that is handled by the drop-off location — creating a fully paperless and packageless returns experience.
Provide Flexible Drop-Off Locations
It’s imperative to offer various drop-off options to cater to diverse customer preferences. This may include returning items in-store, by mail, or through a drop-off location like the post office or a partner retail location. Smart lockers, which are becoming increasingly popular in Europe and could catch on in US urban areas in the near future, are also an area to watch.
While offering multiple drop-off locations is important, retailers can choose to offer incentives within their policy to encourage one option over another. For instance, companies with a brick-and-mortar location may offer free returns in-store only to minimize shipping costs and timing. Additionally, driving in-store foot traffic could lead to a customer ultimately opting to select another size vs. returning the product altogether, as an example.
Issue Fast Refunds
Customers expect refunds as soon as possible, preferring to get their money back within days vs. the weeks that were considered acceptable in the past. Issuing refunds within 24 hours is quickly becoming the norm, largely driven by “the Amazon effect.” Retailers today are striving to deliver a similar experience to remain competitive and keep pace with customer expectations. With that, retailers are more focused than ever on issuing a refund once the package is scanned at the drop-off location.
Communicate, Communicate, Communicate
Customers are looking for consistent updates on the status of their returns and refunds. As mentioned earlier, a self-service portal is critical to offering transparency and real-time updates throughout the returns process. Additionally, ensure you have the proper customer service channels in place. During the returns process, a customer can already feel frustrated. A good customer service strategy will minimize frustrations and not exacerbate them. Provide clear and various methods to contact customer service via phone, email, and/or online chat to resolve any questions or issues in a convenient, timely manner.
The modern commerce environment is ever-changing. While these five steps will help establish a returns process that works for you today, don’t set it and forget it. It’s important to continually track, analyze, and adapt your process in real-time, fueled by quantitative and qualitative feedback like returns data and customer feedback. By referring to these five key steps as a foundation, though, you can remove the friction from the returns process to create a strategy that will meet the needs of both your customers and business.
Mike Bentley has worked at GEODIS for nearly 10 years and currently serves as the Director of Transportation Operations for the Americas region. With more than 15 years in the logistics and supply chain industry, today Mike leads teams of operations personnel that implement and execute diverse transportation strategies to ensure the logistics success for large consumer brands. GEODIS is a global third-party logistics company with expertise across the entire supply chain, including transport services, freight solutions, and warehousing. For more information, visit geodis.com.
This article originally appeared in the September/October, 2024 issue of PARCEL.
