Managing and mitigating the cost of returns is one of the biggest issues that retailers, distributors and manufacturing companies of all sizes struggle with — in 2020 alone, NRF estimates consumers returned items worth a total of $428 billion. Restrictions brought on by the pandemic sparked a rise in ecommerce and consequently led to more returns, as customers send back online orders at two-to-three times the rate of in-store purchases.
Businesses understand that ecommerce will only continue to grow in popularity, making it all the more critical to optimize their return processes.
Given it’s inevitable that items will be sent back and that it’s more costly to gain new customers than to keep those who already buy from you, companies need to take steps to minimize returns when possible and to integrate them into your business when it isn’t. In doing so, they can save money, resources, time — and customer relationships.
15 Top Ways to Reduce the Cost of Returns
Inefficient return processes put companies at risk of disappointing current and future customers and squandering valuable resources that would be much better used elsewhere. Improved practices can reduce the costs associated with managing returns and distinguish businesses from their competitors, so now is the time to act.
Here are ways to make it more likely customers will keep the items they buy, and for those who don’t, tips to spend as little as possible handling returned goods.
1. Focus on product accuracy
Did you know that the two main reasons shoppers return their online purchases are incorrect sizing or unmet product expectations? Both are often a result of the information presented online failing to reflect reality.
Accurately depicting, defining and describing products being sold via ecommerce is an effective way to improve the customer experience and minimize the volume of returns. Online shoppers are unable to try on or closely inspect their potential purchases, hence it is up to retailers to provide the most helpful and accurate information possible. This includes detailed and thorough product descriptions, precise sizing charts, high-quality photos and a Q&A section.
Descriptions should contain an explanation of the product that differentiates it from similar items, bullet points describing the product’s key features and a call to action that encourages shoppers to make a purchase.
Given that sizing charts play an integral role in whether products are returned, especially within retail, it is particularly important to ensure that they contain accurate and up-to-date information. Some websites enable shoppers to enter body type, weight and height data and personal fit preferences to provide personalized sizing suggestions.
By including multiple photos using various angles, distances and lighting, shoppers can closely examine products and more fully imagine how they might use them. That helps bridge the gap between consumer expectations and product reality.
Q&A sections within a product page can reduce uncertainty, as well, by providing shoppers with the opportunity to ask questions about and gain insights into a product before purchasing.
2. Invest in technology
Manually receiving, restocking, refunding and reselling returned items is a laborious process that eats up precious resources and employee time. A cloud-based solution with data from sales, finance and operations provides a central hub to manage returns by tracking orders, inventory and communication across all fulfillment locations and customer touchpoints. It can also automate some steps associated with handling returns.
Order management systems (OMSes) increase transparency and trust among retailers, suppliers and customers by assisting all parties in tracking orders throughout the entirety of the shipping process, while inventory management systems help teams receive, account for, restock and resell returned items as quickly as possible. Both reduce both the amount of labor spent processing returns, and thus the money expended on those activities.
When used with customer relationship management (CRM) systems that compile all customer data and transactions into a single database, retailers are able to build stronger client relationships, guide customers throughout the return process and retain and resell to previously unhappy buyers.
Additionally, the rising popularity of online shopping and the importance of engaging, individualized, modern websites explain why ecommerce platforms are so useful. When combined with OMS, CRM and inventory management technology, these systems reduce customer misconceptions about products and thus the likelihood of returns. Ultimately, retailers are able to provide customers complete product information and enhance their shopping experiences through images, descriptive product descriptions and customized marketing based on customer behavior and purchase patterns.
3. Offer ratings and reviews
Ratings and reviews on product pages are dually beneficial as they allow customers to provide honest feedback on the quality, sizing and features of a product and help potential buyers make informed purchase decisions.
Provide a forum for impartial feedback that customers deem as trustworthy, and buyers are less likely to regret their purchase decisions. For example, a furniture retailer might include fields for customers to include their room dimensions and style, fabric and color preferences in a review that shows up on a product page. Giving potential buyers the option to filter reviews by these specifications can be extremely informative, as it helps them relate to other customers and gives them more confidence in their purchases.
Additionally, retailers gain invaluable insights into product shortcomings and customer preferences that they can then use to improve the design or quality of their items. And that, of course, will lower the rate of returns.
4. Implement flexible and reasonable return policies
More than half of online shoppers have decided against making a purchase(opens in new tab) due to a company’s poor return policy or the anticipation of a difficult return process, so a fair and flexible return policy is invaluable. It can benefit businesses financially by both boosting sales and preventing returns.
Generous, customer-focused return policies that allow buyers to make purchases confidently, knowing that they can return products hassle-free and quickly, build brand trustworthiness, reduce customer cart abandonment and increase conversion rates. For example, short return timeframes, usually ranging from 14 to 30 days, can either pressure buyers into returning items immediately or result in customer frustration and dissatisfaction with the company if they miss the cutoff date. Yet, studies have shown that giving buyers anywhere from 45 to 90 days to make returns is ample time for them to either form an attachment to the product and decide not to return it, or simply forget to take it back.
While establishing trust with customers is necessary to reduce the costs associated with returns, implementing an overly generous policy that fails to account for individuals who will abuse it will end up costing businesses more money. It is important to find the right balance.
5. Allow in-store returns
Considering that a recent report from product returns platform Optoro shows that 66% of shoppers prefer returning purchases in-store rather than figuring out how to ship them back, omnichannel retailers should prioritize policies and processes that enable customers to make in-person returns, regardless of what channel they made the initial purchase through.
Not only do returns at stores minimize the turnaround time for returned products to be restocked and prepared for resale, but they also avoid the risk of products being damaged or lost in the mail. In-person returns also reduce the amount of money retailers spend on return shipping fees, and rather than offering unsatisfied customers special promotional offers and discounts to make up for delayed shipments or refunds, you can provide those offers in store and hopefully make a new sale.
Given that they simplify the logistics involved in the return process for both the retailer and the customer, direct returns are mutually beneficial.
6. Communicate policies proactively
While implementing standardized procedures for accepting and handling returns is important, it’s just as critical for businesses to clearly communicate these policies to potential customers before they make a purchase.
Documented policies that govern different types of returns promote efficiency and result in less time spent processing return orders. These policies should consist of standardized rules on the amount of time customers have to return an item, what items can be returned, the channels to return products through and the condition that returned items need to be in to provide full customer refunds.
These guidelines can then be integrated into an order management system, enabling the business to more swiftly process returns, fulfill exchange requests and refund customers.
Additionally, ensuring that these policies are visible is informative to potential customers and ensures that they have fair expectations. For example, building a designated web page that outlines your return policy then linking to it on product pages and/or placing it at checkout counters in brick-and-mortar locations promotes transparency and can significantly reduce the employee time and dollars spent on customer service.
7. Use rules-based intelligence
Rules-based intelligence systems are integral in automating the time-consuming and laborious tasks associated with returns that eat up employee time. These tools use guidelines, which are written by humans and then input into the system, to manage and simplify the return process.
Businesses that use technology with rules-based intelligence are able to predefine certain outcomes for returns based on product type, condition and other factors. Once an employee inputs details of a returned product, the system can guide the worker through the next steps they should take in order to either restock and resell products, liquidate them or destroy them, depending on item type and condition.
By streamlining many of the tedious steps involved in accepting and accounting for returned items, businesses can reduce the amount of processing time and more rapidly prepare these products for resale.
8. Offer cross-channel purchasing
It’s become clear that many shoppers enjoy both the efficiency and flexibility of shopping online and the convenience that brick-and-mortar stores offer. That’s why retailers with physical locations are doing themselves a disservice if they fail to offer cross-channel purchasing.
Customers who buy online and pick up in-store (BOPIS) are less likely to return items because they can both try on and exchange products on-site, have greater agency in deciding when it’s most convenient to pick up their purchases and avoid paying for shipping — a leading cause of abandoned carts.
From a retailer’s perspective, BOPIS enables faster order fulfillment, lowers delivery and shipping costs — and with it, the cart abandonment rate — and has the potential to bring in additional sales as it increases store traffic.
Additionally, considering that McKinsey found 56% of shoppers plan to continue using BOPIS even after pandemic-related health and safety concerns pass, businesses should see this as an opportunity to grow sales today and in the future.
9. Reduce the number of undelivered packages
Did you know that undelivered packages cost retailers up to $4.2 billion in lost revenue(opens in new tab) every year? Essentially, when sellers fail to ensure that packages are reliably delivered, they risk losing customer loyalty, and wasting money on products and shipping and receiving more returns.
To avoid these unnecessary costs, companies must take preventative steps, such as denying customers the ability to use P.O. boxes as delivery addresses — because packages are often rejected — and providing continuous and accurate tracking to ensure that customers can monitor shipments and see when they will receive their orders.
Additionally, to counter customer claims of package theft or failed delivery, retailers should consider either requiring signatures at delivery or have mail or shipper employees take pictures of delivered packages.
These processes mitigate the costs of undelivered packages, promote transparency throughout the shipping process and ensure that customers receive their items.
10. Enhance the virtual shopping experience
While adding photos to a product page is key to creating a more descriptive virtual shopping experience, providing noteworthy and high-quality videos and other media elements can also facilitate better purchase decisions.
Videos that depict a product and its functionality in a variety of ways that could not be as easily expressed through still photos show potential buyers how to use a product and how it may fit into their lives. For example, a shoe retailer could include videos of someone walking or running in their products to better illustrate and emphasize the features and capabilities of the footwear.
Some companies have gone above and beyond by taking advantage of AI and AR technology to create “view in your room” or virtual fitting room options. These features provide potential buyers with another way to be sure an item is right for them by allowing them to see exactly how a product would look on their bodies or in a physical space of their choosing.
Ultimately, providing virtual customers with in-store experiences that enable them to further explore and inspect the products that they are interested in familiarizes potential buyers with the items, reducing the chances of them regretting and returning their purchases.
11. Refrain from issuing immediate refunds
In an attempt to make the returns process more efficient and ensure that unhappy customers are swiftly satisfied, some retailers are quick to give clients full refunds, even before assessing the quality and resale value of their returned products. This puts companies at risk of incurring more costs since they have to pay for return shipping and may not recover money lost on damaged items unfit for resale after they’ve already refunded customers.
It’s critical that companies establish procedures and standards for confirming the quality and condition of all returned items before initiating customer reimbursement. Additionally, in implementing these procedures, retailers may realize that the return costs for certain items exceed the value of the product and decide it’s more cost-effective to simply refund customers and let them keep the product.
12. Collect customer feedback
In addition to enabling customers to leave reviews after purchasing a product, collecting customer feedback is yet another tactic to reduce the rate and costs of returns.
For example, providing customers who initiate the online return process with a questionnaire to explain their reasoning is key to gaining valuable insights into expectations and preferences, as well as product quality. Whether returns are due to longer-than-expected delivery dates, incorrect sizing, unappealing colors, defective items or another issue, being aware of these issues enables businesses to pinpoint problematic products and improve them.
Continuous product quality improvements are a proven method to lower the number of returns.
13. Retrain sales teams and partners
Items that are returned at an unusually high rate are not necessarily defective or disliked by customers; they may just be being sold to the wrong customers or for the wrong uses. Taking a deeper look at how the marketing and sales team is both marketing and promoting an item can provide insight into why it’s often sent back or performing poorly in comparison with other products.
By renaming a product, adjusting its product description, promoting it using different marketing channels than those that were originally used, changing the sales strategy or even tweaking the pricing, retailers can find the product’s right target audience and lower the volume of returns. This could require some retraining of your marketing and sales team to make sure they understand who would find value in various goods.
14. Consider outsourcing returns handling
Accepting, restocking and reselling returned products can consume a considerable amount of a company’s time and resources, so outsourcing these processes to those that specialize in reverse logistics can reduce the cost of returns.
Third-party logistics (3PL) firms specialize in providing services that optimize the return process to maximize efficiency and take advantage of the best shipping rates. For example, they provide unsatisfied customers with return shipping labels to ensure that orders are not only tracked, but also returned directly to the 3PL so that companies never have to worry about managing the process.
Upon receiving returned items, the partner processes and restocks, liquidates or disposes of products depending on their condition and the business’s return policy. Ultimately, in assuming all responsibility for the reverse supply chain and ensuring that shipping is cost-effective, 3PLs allow retailers to focus their efforts elsewhere.
15. Data-driven, post-purchase communications
Post-purchase communications are essential in keeping customers enthused about their incoming orders and reinforcing their purchase decisions. By implementing a data-driven approach, in which sales and marketing teams are consistently exchanging information on trends around customer behavior and shopping preferences, retailers can be smarter about how they communicate with customers. Using these insights to fuel increasingly targeted strategies can help educate customers on their recent purchases and further bridge the gap between product expectation and reality.
For example, if a business is alerted whenever a customer buys a furniture item that is known to be more difficult to assemble than it looks, the company can proactively get ahead of issues by sending buyers a blog post or video with step-by-step instructions. Using this type of communication has the potential to reduce the rate at which items are returned.
As a retailer, your returns experience has a major impact on the trustworthiness of your brand and whether customers buy from you again. Yet, returns tend to incur high costs that have the potential to drag down a company’s profitability. By following these steps to reduce the cost of returns, retailers can optimize logistics processes to better keep their customers — and money.