Sizing up 2018: The State of Retail Returns
Returns have always been a necessary “evil” when it comes to running a retail business, and eCommerce, in particular, has allowed shoppers to be indecisive without carrying the financial burden. However, what’s great for customers isn’t always what’s great for retailers. In the 2018 post-holiday season alone, customers were expected to return about 13% of their purchases, equating to about $90 billion, burdening companies with growing shipping costs, tighter margins, higher operating costs, and an ever-shrinking bottom line.
In particular, 2018 was the year that retailers decided to fight back against rising returns. Retailers like Sephora and Best Buy implemented new tactics to minimize the effects from returns made by those deemed to return excessive amounts of product–the infamous “Serial Returner.” In addition to changing their return policies, companies began to issue email warnings to these customers, explaining their ability to return product had been suspended. Some customers of e-tail behemoth Amazon had their accounts closed without warning for returning what was deemed by Amazon as exploitative of their policies. And even L.L. Bean, which once proudly championed a lifetime return policy, retired this practice and is restricting returns to one year with receipt.
Taking a look back at 2018, what’s clear is that retailers have identified the source of their growing returns problem, and their fingers are pointing the blame at customers.
Returns: From “necessary evil” to Necessity
Though the retail industry as a whole is taking the offense against customers, eCommerce businesses are under increased pressure to provide customers with fast, free, and easy returns. This market pressure is coming from a few different sources:
- Most obviously, the customers themselves who have embraced omnichannel retail with open arms. Their bedrooms have become their dressing rooms.
- Other businesses seeking competitive advantage in the dynamic marketplace–Spearheaded by online superstores like Amazon, which provide consumers with a wide variety of products, personalized customer experiences, and ever faster and easier returns.
Retailers are left to wonder: Is the only way to diminish the mounting returns tsunami by creating draconian return policies that cut off those who exploit lax return policies from future purchases?
We at Newmine believe in reducing returns without sacrificing customer experience. While brands are scrambling to implement return policies that protect them from (at best) indecisive and (at worst) fraudulent customers there are ways to play defense when it comes to minimizing your returns and growing your bottom line, and it starts with having an in-depth look at your value chain.
Before cutting your customers off, consider the following:
Take a holistic approach to data mining and analytics.
While customers are an easy scapegoat for high return rates, the fact is the path from product conception to delivery has lots of room for error. To meaningfully reduce returns, retailers must identify the root cause. The best way to accurately diagnose the root cause is by collecting and synthesizing data from multiple systems across the enterprise. Luckily, advances in AI and cloud computing have made it possible to mine through vast amounts of data points, not only enabling diagnostics on the root cause but making it possible to prescribe collaborative actions for your team.
There’s a risk in painting “Serial Returners” with a broad brush.
It’s important to recognize that “serial returners” are not all dishonest or fraudulent. Oftentimes, many of these returners are your most loyal customers. Banning them can be short-sighted–as you lose out on Customer Lifetime Value, the net profit that results from the entire future relationship with a customer. Furthermore, these loyal customers are also more likely to be advocates for your brand, spreading word-of-mouth and eWOM. A word of caution to brands who decide to burn those customers!
“Our best customers have the highest return rates, but they are also the ones that spend the most money with us and are our most profitable customers.” — Craig Adkins, VP of Services and Operations, Zappo’s
When you don’t investigate returns, you lose out on priceless directional product feedback.
When a customer returns something, he or she is saying something to the company, usually about the product. It’s an expression that their expectations weren’t met, either in quality, value, or experience. And even if the customer doesn’t reveal their reasoning, the data will. Going back to our first point, the root cause will also provide retailers with the opportunity to forecast what customers really want, and that drives future product success.
Returns are a complex problem for retailers, and therefore the simple solution of cutting off customers who return more frequently than others can easily backfire. We know that returns reduction–without compromising customer experience–is possible because we’ve done it. And we built Chief Returns Officer® so you can do it, too.
Keep your customers returning, not your merchandise!
Want to learn how Newmine reduces returns? Click here to read about Chief Returns Officer®
Wall Street Journal – “What Stores Do with 90 Billion in Merchandise Returns”
Wall Street Journal – “Banned From Amazon: The Shoppers Who Make Too Many Returns”
Fast Company – “Zappos’ Best Customers Are Also the Ones Who Return the Most Orders“