Combating RTO: Paving Way For E-commerce Brands Towards Sustained Growth

It is not enough to simply get a new order on your eCommerce website in order for it to be a successful transaction. The product must go through quality tests, be properly packed, sent to the correct address, and most importantly—the consumer should like it.

The major issue with selling items on the internet is that the consumer does not have the opportunity to examine or hold them in real life. That is why it's no surprise that 30% of all items purchased online are returned as opposed to just 8.89% from physical stores.

This is why, before you attempt to compute your total revenue and ROI, you should also include the Return to Origin (RTO) rate into your analysis. We'll go over everything you need to know about RTO and why it's so crucial for companies in this post.

Let’s Understand What RTO is?

When an order is sent to a buyer and either does not arrive or is returned by the customer, it must be shipped back to the warehouse as Return to Origin (RTO) occurs when a placed purchase is unable to obtain delivery. In other words, RTO stands for non-deliverability of the item and its return to the seller's address.

Ways in Which Companies Can Lose Money Because of RTO

• When orders are delayed in transit, your inventory is blocked.
• Forward and return shipping fees are prohibitively high.
• Manual inspections and repackaging of the returned items.
• Even if an order is returned or canceled, additional expenses will be incurred in processing it.
• As they travel back and forth, the chance of items getting damaged or broken increases dramatically.

Importance of RTO

Helps Calculate the Actual ROI

The ROI for all of your placed orders in a CRM or analytics program is not accurate because it only considers all of the purchases that were made. It does not account for any undelivered or canceled orders, which can frequently result in significant expenditures for the firm. The incorrect ROI might result in incorrect CAC and CLTV values, which can lead to serious difficulties for your company.

Calculating Shipping Charges

When calculating shipping fees for your items, remember to include any return shipping expenses you may be charged if the order isn't delivered or returned by customers.?

You'll have to pay for shipping three times if an order is returned to the warehouse:

1. Shipping the order to the first customer.
2. Shipping the order back to the warehouse.
3. Sending it to a new customer.

Figuring Out the Products that Work Better than Others

Calculating RTO for your company and separating it by items might help you analyze which products are most popular with consumers. You can then discover the reasons behind why some goods are returned more than others, including anything from the quality of the product to whether it appears different on your website than in real life.

You may also classify the RTO rate by city or region in order to determine which pin codes correspond to most undelivered orders and discuss delivery issues with your supply chain partners.

Some Fantastic Ways to Reduce RTO

It's obvious that the lower your RTO is, the better your business return on investment will be. That is why it's critical to keep reducing ROI as much as possible. Here are a few ideas for doing so:

1. Enhance Product Quality

One of the most common reasons items are returned is due to poor product quality. That's why, at the start, you should concentrate on increasing the quality of your goods, particularly those that are returned more frequently. Make a list of the top 10 products with the highest RTO rate and analyze customer reviews to discover why they were dissatisfied with the merchandise.

Finally, you should make certain that your website has all of the product details required by consumers to make educated purchases. Customers are more likely to return items if the information and images on the website do not correspond with the real things.

2. Offer Incentives on Prepaid Orders

On average, 20% of eCommerce orders are returned, but COD (cash on delivery) orders have a return rate of 40%. That means for every 10 COD transactions you make, four will be returned.

Although COD is a beneficial payment strategy that has helped popularize eCommerce in countries such as India, it must be utilized and implemented correctly to minimize RTO and improve ROI. Discounts, cashback, or COD fees may be used to incentivize pre-paid orders. Prepaid orders have also become more convenient and less time-consuming than traditional COD purchases due to the rise of online payment options via e-wallets and UPI.

3. Identify Which Customers are More Important

You may use end-to-end marketing analytics software to connect RTO data with your CRM data and analyze who has the lowest RTO rate, allowing you to specifically target these consumers with special offers and discounts to increase their CLTV. You may also determine clients with the highest RTO rates to learn more about their main concerns and issues with your goods.

4. Offer Exchanges Instead of Returns

Retailers may accrue this money and keep customers coming back by making the trade process easier. We propose that commodity returns be fully reimbursed and that goods with equal value be exchanged right away. It's a smart approach to get consumers to stay at your store until the return procedure is completed in order for you to give them a refund so they will go to another retailer to obtain the same thing.

Bottomline

There's no way to prevent all returns. Still, when they do occur, it is critical to have a strategy in place for dealing with them in the most effective manner possible. If you run an e-commerce business, you'll almost certainly get a certain amount of refunds, so taking action now will significantly lower the likelihood of that happening.

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