How to make returns your competitive edge

Returns are the new normal in 2017. The online retail landscape has been shifting fast this year. The world of e-commerce is reaching a critical point where a majority of the adult population is actively shopping online. Shoppers have formed a baseline expectation of what a good experience should be like based by comparing the multiple sites they actively shop with.

How ubiquitous has e-commerce become in 2017? Here’s an interesting data point: Amazon.com has passed the 300m annual users mark. The US has an adult population of 249.5m.

While not every Amazon user is in the US, the .com domain is primarily US customers (other countries have .co.uk, .ca, .fr, etc. as main site). Bottom line: most online shoppers will benchmark the experience on your store against Amazon's whether they do it consciously or not!

Based on increasing shopper expectations of convenience, we believe it’s never been more important to invest in a compelling return experience to succeed as an online retailer. Fashion retailers are now facing 25%+ return rates and growing.

A great part of the fun of building Return Magic is the perspective we gain from all the discussions we have with merchants and shoppers. We aim to understand what makes returns magical for them. We’re drawing directly from the learnings of over 2,500 merchants, including leading brands such as OBEY Clothing, Tigermist, LeSportSac, Paul Evans & Peter Manning. In order to understand shoppers, we asked 1,000 consumers in North America, Europe and Australia about their expectations with online returns.

We’ve condensed all of these inputs into some of the most interesting insights from both shoppers and merchants. It is available now in Return Magic’s 2017 Black Friday guide to returns.

The following sections are highlights from the Black Friday guide. We divided the topics in two perspectives: Part 1 discusses what makes returns magical for shoppers. Part 2 focuses on how merchants make return magical for themselves.

Part 1: What makes the return experience magical for consumers?

When asked about the state of returns in 2017, consumers had three key messages:

1. Returns are the new normal. There is a baseline expectation of convenience formed by comparing the return experience across multiple retailers they shop with. They expect to return easily and be able to try at home without incurring extra costs or risks if they decide to return.
2. Returns affect their decision to purchase or not. Most shoppers do read the return policy and they will stay away from any retailers that make their policy unclear, complex or simply not customer-centric enough.
3. Returns build trust and loyalty. Shoppers that return the most are also the most loyal. They engage with the brand and the return policy can encourage them to buy more, growing long term customer lifetime value.

Let’s take a look at the data behind each of these three topics:

1: Returns are the new normal.

• 89% of consumers have returned an online purchase in the last three years. The return touchpoint is now mainstream and affects most of your customers.
• 41% buy the same item in multiple sizes or variations, with the intent to return some of them.
• 58% of shoppers mentioned that adding return friction with extra email or phone communication results in a negative return experience. One irritant that came up often is the lack of clarity to track a return status. Many shoppers are worried about their returns getting lost.
• 80% of consumers expect free returns, while only 25% of retailers offer free returns. This tells a lot about the challenge retailers face to meet the shoppers expectations.

2: Returns affect their decision to purchase or not.

• 83% of consumers read the return policy before buying. It pays to optimize your policy for conversion like any other copy. Unfortunately many retailers show their policy in fine prints, long and complex language which is not customer-centric. Changes in the return policy should be tested to understand impact on conversion and costs.
• 71% of customers find that a restocking fee or shipping fee can prevent them from making a purchase. This high varies by country and product category. Fashion is the category where most shoppers expect free returns.
• 57% of customers believe that the return window should be at least 30 days. Increasing the return window gives them comfort that they will have time to make up their mind without risking missing the window. A long return window decreases urgency to return; shoppers tend to forget they bought something about one week or two after they bought it. So with less urgency more shoppers tend to keep their purchase.

3: Returns builds trust and loyalty.

• 72% of consumers said they would spend more and buy more often with merchants that make the return experience simple.
• 77% of returns are done by repeat shoppers. Or to say differently, people who return alot also tend to spend a lot, and they trust the brand. It means that they are actively engaged with the brand.
• 89% of repeat customers who had a good return experience are likely to buy again. The return experience is a good predictor for customer loyalty and overall customer NPS.

On the topic of returns and loyalty I find myself often sharing this great quote by Tony Hsieh, CEO at Zappos, who makes a good case for more convenience to grow customer lifetime value:

“We also offer a 365-day returns policy for people who have trouble making up their minds. (Originally our returns policy was only 30 days, but we kept increasing it at the urging of our customers, who became more loyal as we lengthened the returns period.) Our returns run high — more than a third of our gross revenue — but we’ve learned that customers will buy more and be happier in the long run if we can remove most of the risk from shopping at Zappos.”

Part 2: What makes returns magical for merchants?

Merchants have a different set of problems than shoppers when dealing with returns. Of course they deal with the delivery of a compelling experience. But they also deal with time consuming, highly manual and repetitive tasks which can be automated. They deal with lack of data and understanding. They deal with large and growing costs. Over hundreds of conversations we’ve come to identify interesting practices that can hopefully benefit the broader merchant community. Here is a sample of some of these best practices. The full list is available in the guide we referenced earlier.

• Create specific Black Friday policies for final sale & discounted items. It can be done for any other seasonal promotion or even all year long. Use product tags to exclude items or offer a store-credit-only refund on discounted items. By using product tags, you can create a smart way to manage returns specific items to protect profit. This is something Return Magic can help you with.
• Invest in automation to handle large volumes. Just like e-commerce revenue, returns tend to be seasonal.Dealing with fast growth is overall a great thing for retailers. However a side effect of this growth comes when there are too many returns to handle effectively, leaving the customer with a poor experience. In order to keep on top of increasing returns, retailers should streamline the process by automating labels, tracking &refunds. By saving time on repetitive tasks, customer service is free to focus their time on value-add tasks, like building the relationship with the customer.
• Offer many ways to refund your shoppers. Leverage gift cards. Shoppers like choice. They already can choose from multiple refund methods on many other websites. Why limit them to one option i.e. original payment? By offering many refund options, you can enhance the experience. Shoppers love the convenience from having more control. This can help build trust in the brand. Related #6, when customers choose gift cards as a refund option, you get to keep the money in your store. So you can encourage gift card refunds to improve your cash flow position. For example some merchants will deduct a fee for cash refunds, while they will offer gift card refunds for free. This gives an incentive for the shopper to opt for gift cards, while staying in control (they can still pick cash refund).
• Be transparent. Send email updates. Make tracking simple. Making the return process transparent can deliver many benefits. Confusion erodes brand trust. Uncertainty increases customer contact. By giving them the means to track their order themselves, and sending them email or SMS updates, you help your customers relax. You make them feel more important too.

Returns are the new normal in 2017. Customers have a higher baseline expectation of convenience. Your return policy will influence whether they buy on your site or not, and how much and frequently they will buy. Is it key to equip yourself to deliver a compelling experience, while also ensuring you optimise returns for revenue and profit. We hope you enjoyed these insights and please reach out if you want to take your returns to the next level.

About Return Magic

Return Magic is an API solution for online merchants. Software as a service to optimize the return touchpoint for revenue and profit. With over 2,500 installed merchants, Return Magic is the top rated return app on Shopify. Learn more here.

Source & Credit: Return Magic 2017 Consumer Survey. Canada Post’s How to Transform Returns into Assets, Metapack’s Returns — the new battleground. Thanks to our customers for sharing their learnings and ideas.