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Ecommerce: Improve returns management to save the bottom line

Steven Ledgerwood
09 August 2016

Among today’s connected consumers, the ability to return a product is as important as the speed and cost with which it can be delivered. Items of varying sizes and colours are often bought with the intention of returning those that don’t fit the bill. In the fashion and apparel world, where around half of all goods are sent back, the bedroom is the new "fitting room".

Digital natives are accustomed to personalised promotions and geo-located marketing messages. They are savvy shoppers and use multiple devices to access customer reviews along with social media channels to research the desired products. Speed and convenience are at the top of their priorities list and will quickly make a decision when they find the right product, especially if they know they can return the item free of charge.

Hidden costs

For retailers, however, the cost of returns can have a serious impact on their profits. While the vast majority of items can be re-sold, there are still substantial costs involved in the process of retrieving the product and reintegrating it in the sales cycle. At the same time, some products are damaged in transit and cannot be sold anymore.

As a significant proportion of expenditure is associated with returns, retailers are now considering the sustainability of their offers, even though they are fully aware that this is one area in which they can effectively differentiate themselves from the competition.

But what happens if a retailer does decide to introduce stricter policies or charge customers for returns? Will it have a long-term negative effect?

Positive experience

There is no straight answer, but the most successful retailers know that what a customer values most is not free returns, but a memorable, positive experience across the entire purchase cycle from browsing the website to timely delivery in line with the most demanding expectations. A frustrated or disappointed customer is unlikely to remain loyal if their experience was poor, even if they are offered a free returns service.

We also have to bear in mind that not all customers actually want to return an item. They are more likely to order and keep a product that is the right size and colour. Returning an item is added inconvenience, free or not.

However, there are still cases when even if they offer a high-quality shopping experience the retailers can’t avoid some of their products being returned.

For example, one of our employees is an avid shopper, but he struggles to find clothes that fit him. He recently found a shirt when browsing on his mobile and arranged a "click-and-collect" from a local shop of the retailer. Although pleased with his choice, he later found the same shirt in other colours and at a better price from another online retailer. After purchasing these, he returned the original to the store.

Besides the lost sale, the first retailer has to consider their competition along with the how to reintroduce the item back into the sales cycle, which of course comes at a cost.

Such situations need to be taken into consideration when assessing the total costs of returns. Retailers have to make sure that besides having the right products, they also implement a competitive pricing strategy. And yes, some customers might actually cost money from a cost per acquisition perspective, but their lifetime value could end up being higher if a retailer garners their loyalty and ensures that their needs are met.

As a general rule, if they want to significantly reduce the rate of returns and keep their clients happy, retailers should improve the relevance of their customer offers, polish their personalisation engines and implement better cross-channel campaign management. This equates to new customer on-boarding programmes, better product information, engaging visuals and clearer policy wording.

These strategic actions are even more important when the retailer is active on multiple channels, managing both online stores and brick and mortar shops.

While there is no easy way to prevent returns, retailers can significantly reduce their rate by clearly understanding the reasons behind their customers’ purchases and returns and arming themselves with accurate real-time intelligence that shines a light on past and present behaviour while creating a picture of their potential future actions.

Steven Ledgerwood is managing director UK for Emarsys, a global provider of marketing automation software and the first marketing cloud for retail and e-commerce.

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