Revenues serve as the modern approach to business expansion
Rewritten Article:
Holiday shopping is usually followed by a tidal wave of returned goods, giving retailers sleepless nights and lost revenue. But by designing the return process to be simple, transparent, and user-friendly, you can remove the anxiety associated with returns for customers, and for retailers too. To achieve this, businesses can take active steps to minimize returns by focusing on creating a smooth, easy, and hassle-free return process.
In light of the COVID-19 pandemic, consumers have shifted towards online shopping, leading to a surge in e-commerce growth by 44% in 2020 (representing 21.3% of total retail sales, compared to 15.8% in 2019). Online shopping is here to stay, with another 13.7% jump in e-commerce sales expected by the end of 2021.
The challenge for retailers is that around 20-30% of online purchases are returned, compared to only 9% in physical stores. If the problem of returns isn't addressed head-on, the shift to e-commerce could negatively impact retailers' sales and profitability, with increased costs, reduced margins, and lower revenue being the results. However, if properly managed, returns can actually be part of a retailer's growth strategy - offering easy return policies can drive sales, and targeted preventive measures can lower the overall return rate, enabling retailers to boost their growth and retention of sales.
Designing returns as a growth opportunity
A former head of customer experience at Amazon stated, "Customers who had a great seamless return experience would drive more sales than a customer who never had to return a product." In other words, returns can boost sales.
In order to drive growth, the returns process needs to deliver three key benefits: an improved customer experience, cost optimization, and revenue preservation. Here are five best practices to help retailers achieve these goals:
- Take the anxiety out of the shopping experience by making the return process clear and easy to navigate. Communicating the simplicity of returns as part of the shopping experience can help customers shop with more confidence. For example, offer free returns, and guarantee replacements for every product.
- Eliminate the need for returns by being proactive and reducing the likelihood of returns. Identify the top reasons for returns like product damage, inaccurate descriptions, customer dissatisfaction, etc., and work towards resolving the root causes. Use tools such as augmented reality, product fit reviews, refining product descriptions, and improving packaging to reduce returns.
- Create a frictionless, easy, and user-friendly return process. Offer multiple return options (mail back, in-store, drop off, pick up, etc.) and remove as many steps as possible (no label, no packaging) to create an effortless return process. Offer more drop-off locations, provide extended return periods, and offer fast reimbursements or instant credit for customer satisfaction.
- Optimize the reverse logistics and speed up the time products are back on the shelves. Processing returns can be costly, so reducing the time products are out of stock can help reduce costs and preserve margins. Some solutions include facilitating returns directly to stores and consolidating or bulk returns in locations near customers to save on reverse logistics.
- Drive sales by leveraging returns as an opportunity to save the sale. Entice customers to make additional purchases during the return process, offer personalized recommendations, or provide incentives like discounts or bonus credits to encourage immediate repurchases.
Not all retailers are equal, and different companies require a tailored mix of strategies for turning returns into a growth strategy. For example, retailers with large footprints may benefit from having more in-store returns, while smaller footprint retailers may need to employ other solutions, like adopting predictive analytics and leveraging drop-off locations for cost-effective and revenue-generating return strategies. With the pandemic-fuelled trend towards digital selling, all retailers have the opportunity to capitalize on this shift and deploy a new set of returns practices, technologies, and solutions in a digital-first environment.
- Embracing AI and machine learning, retailers can predict and prevent problematic returns by anticipating customer preferences, improving product descriptions, and refining packaging, ultimately turning returns into a growth opportunity.
- In the face of increased online trade due to the pandemic, proactive management of returns through transparent policies and targeted steps can help retailers maintain a positive public image, as poor return experiences can lead to negative reviews and lost business.
- To ensure compliance with environmental law, retailers must take responsibility for environmentally friendly reverse logistics, managing returns sustainably by recycling or donating returned products, and reducing carbon emissions associated with the transport of returned items.
- By closely collaborating with financial institutions and fintech companies, retailers can expedite repayments during the return process, offering instant credits or quick reimbursements, which can help boost customer satisfaction and encourage repeat business.
- To remain competitive in an ever-evolving business landscape, retailers must stay abreast of technological advancements, adopting innovative solutions such as augmented reality and blockchain, ensuring a seamless, user-friendly, and secure return process that meets the demands of tech-savvy consumers.
