If there is one area in retail that’s ripe for disruption, it’s returns.
Long considered the “dirty little secret” of retail, returns are one of this generation of retailer’s critical challenges, if looking to be financially successful. Every retailer today is managing the “process”of returns. It is expensive, cumbersome, and labor-intensive. But how many retailers are proactively focusing on returns reduction—actively working to make sure they deliver products that customers keep?
Why returns reduction?
A sale isn’t really a sale until your customer decides to keep it, making “keeps” the most significant indicator of business performance.Research has shown that 73% of returns happen due to reasons within the retailer’s control, such as:
- Product quality not as expected.
- Product description mismatch.
- Issue with product fit.
- Wrong item sent.
- Product arrived damaged.
- Product arrived too late.
The traditional retail returns approach asks, “How can I process all of these returns?”
Returns reduction rethinks the paradigm: “How do we ensure we’re delivering products that customers will want to keep?”
A returns reduction-centric approach recognizes returns can be used as a spotlight into areas of opportunity for retailers to drive product and service enhancements and efficiencies, and successfully deliver on their promises to customers. Retailers that switch their perspectives on dealing with returns from reactive to proactive start to ask the questions that reveal opportunities hiding in plain sight. Questions like:
- Why are consumers sending the product back?
- Are we letting them down, and if so, how?
- Are our product descriptions and depictions causing returns?
- Are our carriers performing?
- Is our fulfillment accurate enough?
Profit: Economic rewards are in the millions
Returns are expensive. Too expensive to be simply dismissed as “a cost of doing business.” And while retailers know returns are a massive expense, most don’t have visibility into the full financial implications of returns on their business. Given the significant impact on net and gross sales, the returns reduction ROI opportunity is irresponsible to ignore.
A meaningful leadership conversation about returns starts with a comprehensive analysis of the broad impact that returns have on the business. This begins with understanding the substantial financial win from reducing returns and extends to the significant impact on customer experience and environmental sustainability.
People: The best customer experience is when a customer keeps the product
At this point, fast, free, and frictionless returns are table stakes. Most customers consider a company’s return policy when shopping online. Customer-friendly return policies provide a security blanket if something “goes wrong.”
However, no matter how good the retailer makes the “returns experience,” four in five shoppers are dissatisfied with the number of times they must return products to a retailer, and 42% of customers will stop shopping with a brand upon multiple retailer-induced returns. Intelligent Returns Reduction and prevention curbs customer disappointment and churn by focusing on the corrective actions that can be taken on the 73% of returns that are controllable by retailers. In short, the best return experience is one that never has to happen.
Planet: The environmental imperative
Last, but certainly not least, product returns have an increasingly detrimental impact on our planet. For 5 billion pounds of returned goods each year, their forever home is a landfill. We would need to plant 93 million trees annually (3% of all trees on Earth) to offset the carbon footprint of transporting returns alone.
Returns reduction has become a meaningful strategy to support sustainability goals for forward-thinking retailers, by reducing packaging waste, carbon dioxide emissions from transportation, and ultimately reducing the amount of waste their organizations produce.
How returns reduction is possible
If returns reduction is so valuable, why has it taken so long to catch on? The answer is twofold: 1) solutions to the returns problem have historically focused on processing and management over prevention and reduction, and 2) retailers haven’t had scalable technology needed to support a returns reduction strategy.
To reduce returns and reap the benefits, you need to disrupt the traditional mindset around returns. Here’s how to get started:
- In a time where returns account for 16.6% of all domestic sales, make your mantra, “it’s not a sale until it’s a keep.”
- Recognize that returns are a signal that something can be improved in your business—view them as an opportunity.
- Commit to making returns reduction the cornerstone of your returns management strategy.
- Adopt the right AI tools that empower your team by:
- Monitoring and analyzing transactional and customer feedback data to identify the root cause, whether it’s a product, supplier, or operational issue.
- Provide prescribed remedies based on the root cause.
- Predicting and identifying issues in-season.
With 2022’s upcoming supply chain challenges, such as shortages and surging logistics costs, the retail industry can’t afford not to reduce returns. By focusing your time and effort on keeps over sales, you can attract repeat buyers and loyal brand advocates, all while sustainably improving profitability.
Returns don’t need to be your Achilles' heel. With the right attitude, they can be your prophet.