February 3, 2020
Tom Murphy
Frankie Co-Founder. AI, Ecommerce and SaaS expert.
Returns are the new normal. Attractive Return Policies from competitors and the desire of online shoppers to avoid the financial downsides of poor purchasing decisions, means Returns are here to stay. The over-riding evidence clearly indicates that returns are a key ingredient in your eCommerce success. Unless done right, your approach to Returns can erode conversion rates pre-purchase and deplete margins post-sale and potentially threaten the very viability of your business. Given their importance, Returns should be front and center in your e-commerce strategy.
SHOPPERS READ RETURNS POLICIES
It’s now widely accepted that digital consumers read the Returns Policy before making a purchase. Several studies confirm this trend, differing only on the proportion of ‘readers’:
• 49% shoppers read returns policies according to a 2017 Narvar study
• 66% shoppers read returns policies according to a 2015 UPS study
• 63% shoppers read returns policies according to 2012 Comscore study
KEY TAKE OUT:
1. Shoppers want to see your policy – make sure it’s easily accessible
2. Measure the traffic to your policy so you understand its readership
RETURN POLICY IMPACTS PURCHASE DECISIONS
Not only do digital shoppers read policies, but the policy impacts their purchase decisions
• 51% of US digital buyers avoid purchasing goods from online retailers that do not offer free returns according to a Nov 2018 survey from omnichannel ecommerce company Radial. Digital consumers were most hesitant about the return process for clothing and accessories
• 18% of UK shoppers report they will only choose retailers that offer free returns according to a May 2019 Barclay study.
• Restrictive returns policy will prevent customers from buying with 84% indicating restocking fees and 74% indicating return shipping fees are a turn off according to the 2017 Narvar study.
• The dated, 2012 CNBC report, found sales increase when free returns are offered (up to 357%)
KEY TAKE OUT:
1. Make sure you craft your policy to assist in conversions. Note, free is not necessarily best
2. Pro-tip: A-B test different return policies for greater clarity on what’s best
When goods are returned, the experience is as important as the actual policy
• At the point when return shipping, expenses are charged, 81% of consumers are more averse to make a future buy – Upstream Commerce
• 81% of consumers need an advantageous returns arrangement that is without bother and with no arrival shipping cost – UPS
KEY TAKE OUT:
What happens when customers return something, can be as important as the Policy itself
Industry commentators illustrate the prolific adoption of Free Returns. The 2018 L2 Gartner study, (one of many such studies), shows how major Retail Brands offer Free Returns is high (84% late 2018) and it has been trending upwards (70% in 2017). The key take out here, what your competitors do (competitive pressures), can’t be ignored.
KEY TAKE OUT:
Returns Policies can’t be ignored and ensure you’re aware of what your competitors are doing
With the widespread availability of Free Returns, we’re seeing the behavior of online shoppers change, with increased costs for the retailer. Emerging behaviors include Bracketing and the Serial Returner.
BRACKETING:
• Bracketing, the practice of purchasing multiple variations of an item (color, size etc) with the intention of returning some. Shoppers who bracket by category.
• 40% of digital buyers say they use bracketing some of the time; luxury shoppers do this 51% of the time. Bracketing by it’s very definition, means goods are being purchased with no intention of retaining – so inevitable returns eventuate, source: Narvar June 2017 survey of 677 digital buyers who had returned an item in the past six months.
The rise of the ‘serial returner’ was publicized by the UK’s BarclayCard in their 2018 study, which indicated:
Key take out:
Consumer behavior has changed from ‘I want to buy this and may return it if it’s not suitable’ to ‘I am likely to return half of what I buy’ and you need to manage this change.
Return Magic compiled this information after looking at returns across 1,000 businesses and 800,000 Shopify customers in multiple industries. Top reasons for returns: 2018 study, which indicated:
Key take out:
Reportedly, half of returns are size related (i.e., fashion/apparel face the biggest challenges with returns)
The huge cost of returns is now widely recognized as a growing challenge for online e-commerce. The online industry is responding.
Barclaycard report UK Retailers report taking the following 10 steps to address the Returns epidemic.
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A/B testing is the most reliable way of determining which changes to your online assets generate improved results. I can’t recommend A/B testing strongly enough. A/B testing allows you to:
A/B testing is not a single event, but rather a philosophy. A/B testing allows you to improve the performance of your online assets, but it can do more. You should always be asking yourself if there is A/B data to support the effectiveness of an idea, a tool or any approach you’re considering. Adopting the philosophy of A/B will serve you well – get started on your A/B journey today.
The crackdown on serial returners involves identifying serial returners from their shopping patterns and insisting returned items are in resale condition with original packaging and all labels attached.
Here are some suggested approaches to protect yourself from serial returners by utilising automation in your e-commerce platform.
Key take out:
Protect yourself with safeguards built into your Returns Policy and your Returns Process.
Retailers manage return payments via 3 main strategies (Source Return Magic):
Merchant fee’s can differ on each option, e.g., no fees on gift card or exchange, some fees on refund.
Key take out:
Exchange, Gift Card and payment refunds are available options to manage return payments.
Niche players have emerged to assist in helping manage the logistics of Returns. Returnly, Loop, Happy Returns and Return Logic are some suppliers in this space receiving good customer reviews. In addition to their offering, you may gain further insight from the list of clients they parade – any similarities with you or your vertical?
Generous online shopping Returns Policies were arguably initially driven by businesses looking to differentiate and grow their market share.
A Nov 2016 Swedish study looking at Returns Policies in Fashion e-commerce found that Free of Charge Returns Policies do not necessarily benefit retailers in terms of long-term profitability. Instead, they saw the best results for the retailer when they adopted a lenient returns policy. Their key finding was that returns policies for Repeat customers generate a significantly higher contribution per order, while returners and customers who enjoy free returns generate a significantly lower contribution per order.
If you have the data, look at how your returns vary with sales. Understand where you best customers lie and take this into account when crafting your returns policy.
When crafting or reviewing your Returns Policy, you should weigh these factors:
Zappos (Amazon) is often cited as “the model” for a great return policy. However, Founder Tony Hsieh reveals in ‘Delivering Happiness’ that it was a severe drain on profitability and at times they could barely meet payroll – resorting to more VC funding to stay afloat. Amazon eventually acquired them for less than a 1x multiple when similar companies were going for 4-5x multiples. The key take out, Free Returns have very real and significant financial costs. Ensure you can meet the costs of your policy.
Studies show three key themes emerge in how refunds are managed: Ease, Speed and Communication.
1. Returns Ease
Store returns offer a distinct advantage over pure-play online retailers. 38% of survey respondents say they explicitly prefer returning an online purchase to a nearby store whenever possible. Nearly half (47%) of shoppers say that it’s easier to return to a store, source: (Narvar). Shoppers cite two key advantages to returning items to stores: (i) they get immediate credit for their return and (ii) they can shop for other items while they are in the store. This point was behind Kohls recent announcement to expand its Amazon returns policy. The returns program is simple: Amazon customers can drop off their returns for free at Kohl’s. The Kohls store handles packaging and logistics and benefits Kohls in increased foot traffic.
2. Returns Speed
Take out: the speed and means of the handling a Return is important.
3. Returns Communication
75% of Amazon buyers considered their returns to be easy vs 65% of non-Amazon digital buyers – despite Amazon returns taking more effort. How is this possible? A key study found that communicating with your customers trumped ease of return in terms of generating customer satisfaction (June 2017 study by Narvar surveying 677 digital buyers). Here are the details:
1. The policy
2. Clarity, do you specify:
3. Access and support
4. Hassle Free
Returns are a key element in successful e-commerce. Returns policy is an often overlooked tool in boosting conversions on Ecommerce stores. Ensure your approach to Returns receives the attention it deserves.
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