The clear majority online shoppers will check a company’s return policy before making their buying decision. Whether the customer makes the purchase or not depends a lot on how easy it would be to eventually return what he bought. As up to 50% of products that are being bought online are being returned, this is an expensive exercise for many e-tailers.
The fate of returned products varies from one case to another. Depending on the condition of the goods, they can either be put back into inventory, resold as ‘like-new’ products at a discount, liquidated or discarded. Often, as low as 10% of items are put back into inventory and sold as new. The rest are sold at a lower cost or not at all. Add to that the cost of return shipping which the customer is not charged for.
On the one hand, companies want to offer the consumers the best shopping experience to maintain customer loyalty and bring in more business. On the other hand, to flexible conditions and consumer friendly returns options reduces their margins. According to customers, the most attractive returns experience offers free returns, quick processing and flexibility. Larger companies and e-tailers like Amazon offers all these options, but for smaller sites, a customer-pleasing returns policy do eat into the ROI.
How do you balance a good returns policy with profit margins?
Here are some ideas and suggestions:
Reverse logistics infrastructure: A budget needs to be set aside to hire and train extra staff to handle the load of returned items that come in. Returned items should, on return, be categorised on whether they can be resold or need to be disposed of. The sooner this process can happen, less time and money get wasted while returned items await their fate. This process also decreases the risk of items going out of season and increase their chance of selling again.
Brick and Mortar drop points: Many e-commerce sites that have brick and mortar retail outlets in certain urban areas as well should take advantage of using these spaces as pickup points. Items can be inspected, processed and even replaced at a dedicated counter which saves a lot of time and increases customer satisfaction. There is also a chance that by bringing a customer into the store, there is an increased possibility of them doing some more shopping. Alternatively, an e-commerce company could have dedicated pickup points in major cities where customers can drop off items and get a refund within 24-hours.
Automated system and logistic solution: A big problem faced by e-commerce sites is the uncertainty of how many items will be returned each month. It is hard to plan and budget for items that come in especially at the last minute before the time window closes. Having an automated system like an app or mobile logistics solution could help keep companies notified of returns a little in advance. Customers could download the app directly to initiate a return, or the representative at the pickup point could use an in-house app. The app helps to automate and track and trace the returns process and can collect information like:
- Which item is being returned
- The reason for the return
- The customer’s choice of refund, replacement, store credit and so on
- When the item will return to the company.
Based on the data, the company can be prepared beforehand for the returned item and budget accordingly.
Outsourcing to third-party drop and delivery: Many e-commerce sites don’t have the infrastructure in place to have a brick and mortar retail outlet or a physical pickup point. In a situation like this, it might be a good idea to outsource to a third-party company that serves as a pickup and scanning point for several e-commerce sites. In this case too, an automated system could improve and streamline the processes.
In most cases, an easy returns policy encourages more customers to buy products. The increase in sales more than makes up for the costs of implementing a seamless returns process.