Creating an optimal, frictionless customer experience is central to the success of businesses that make, sell and distribute products, but there is one aspect of it that’s often overlooked: returns.
Effectively managing returns is starting to earn more attention — but still not enough — from corporate leaders. Roughly 11% of all purchases get returned, totaling a whopping $428 billion worth of merchandise in 2020, according to the National Retail Federation (NRF). The return rate for items bought online is around 18%, much higher than for in-store purchases, which is a big reason why the value of returns continues to accelerate.
Companies need to build a returns strategy that encompasses reverse logistics to both protect profitability and encourage customer loyalty, not to mention reduce the overall number of returns. Here are five ways to lower your return rates:
- Nail Fulfillment the First Time
Sometimes the most important strategies are also the simplest. Customers of course expect that their order will include the exact products they purchased, and they also want it to arrive quickly. But if shipping takes too long, they may no longer need the item or have ordered a replacement elsewhere. Sending the wrong product will obviously lead to a return in most cases.
That’s why fast and accurate fulfillment is one simple and effective way to reduce the number of goods that end up back in your warehouse or store. That requires an inventory management system(opens in new tab) that updates in real time so you’re not selling products you don’t actually have available. That inventory system must be tightly integrated with an order management system(opens in new tab) to get shipments out the door quickly and give customers frequent updates. Customer notifications when an order has been received, shipped and sent out for delivery will help set the right expectations.
- Provide the Right Quality at the Right Price
Most returns can be blamed on a purchase not meeting the customer’s expectations in some capacity, which often means quality. The price point should be representative of the quality of a good and its expected lifespan. There are budget-friendly, moderately priced and high-end versions of almost any product you can think of because each serves different types of buyers. As the price rises, so do the customer’s expectations. For that reason, a costly luxury good that only delivers moderate quality will have a higher return rate.
Businesses need to consider this as they develop, design and price new products. That means acquiring the right materials and components for various products that will deliver the value customers anticipate.
- Create a Clear Return Policy — and Don’t Hide It
It may surprise you to learn 61% of shoppers check a merchant’s return policy before they make a purchase, per a UPS study(opens in new tab). Your policy should be easy to find on your website and prominently displayed in stores. It may even make sense to include a copy of the policy with online orders. Hiding it can decrease conversion from your more proactive customers and generate more complaints from those who try to return merchandise out of policy.
The return policy should also have clear rules and leave little room for interpretation. Set return windows and other options, if any, beyond that window (for example, after 30 days merchandise can only be returned for store credit). Lay out any restocking or shipping fees that come with returns. A comprehensive and definitive policy will reduce the number of customers who try to return goods out of policy and gives associates a clear basis for rejecting those returns.
- Help Customers “Shop Better”
Giving customers all the detailed information they might want to make an informed decision is another way to avoid returns of online purchases. That means numerous high-quality pictures from different angles of every item and perhaps a short demonstration video. Product pages should include detailed specs and item descriptions, like the best uses for a certain item. Add a Q&A section where your customer service team can answer questions from customers. Create a sizing chart with all the key measurements so a customer can see whether a pair of pants will fit them before pressing the “buy” button. All of this must transfer well to a mobile format — almost 75% of all online sales now happen on smartphones and tablets(opens in new tab), according to Oberlo, maker of a dropshipping(opens in new tab) application.
Providing this information and imagery requires a system that enables users to update their ecommerce site quickly and easily. An ecommerce solution that’s user-friendly and supports all of these features is essential. This also requires investing in contractors or staffers who can create and publish all of this content.
- Introduce Customer Scorecards
You’ve likely heard stories of Amazon banning customers for returning too many purchases. While you may want to consider that in extreme cases, this practice highlights the importance of tracking the returns activity of all customers. You can then use that information to develop “scorecards” that show customer spend, customer lifetime value (CLV)(opens in new tab), number of purchases and other relevant numbers alongside their returns activity. A company can then set special rules that apply to shoppers who exceed certain returns thresholds. For instance, if a customer has sent back eight of their last 10 orders, returns may require manager approval moving forward.
These are issues that must be handled on a case-by-case basis, because some of your biggest spenders may also be some of your biggest returners. Perhaps they are a loyal customer who frequently orders multiple sizes or colors of the same item and keeps just one of them (better images and descriptions, as well as sizing charts, can help with this). But a scorecard allows you to make a fully informed decision and prevent obvious abusers from making returns.
NetSuite’s unified platform includes financials(opens in new tab), inventory, orders, ecommerce(opens in new tab) and customer records to help you build an exceptional customer experience. The system will help you adopt some of the strategies here to mitigate returns. It can also help companies manage their entire reverse supply chain when they do receive returns.
As customers increasingly turn to ecommerce, the volume of returns will also increase. In turn, businesses must identify and implement ways to reduce the number of products sent back to keep their bottom line from shrinking.
To learn more about strategies to protect the profitability of returns and how NetSuite can help, check out our new business guide, Improving Your Return on Returns: 9 Strategies for Improving Reverse Logistics(opens in new tab).