After the rush of holiday revenue in November and December comes the rush of returns in January. The flood of post-holiday returns is a perennial headache for brands and retailers. The average return rate during non-peak seasons is a little over 16%. Post-holiday, that percentage jumps to 18%.
But returns also present opportunities for online retailers and brands.
Brands and retailers should, of course, focus on reducing returns. But they can also leverage the returns process to build loyalty, collect first-party data and increase upsells.
The Scale of the Problem
Brands are dealing with unprecedented numbers of returns. U.S. shoppers alone are expected to return $173 billion worth of holiday purchases. That’s a 28% increase over last year. This surge can have a significant impact on ecommerce businesses, both financially and operationally.
Retail Returns Statistics
To better deal with the January returns surge, it is essential to understand what consumers are returning and why.
Returns by category
Some retail categories see more returns than others. Among the top categories of products that end up back with retailers are:
- Clothing
- Bags and accessories
- Shoes
- Consumer electronics
Naturally the rate of returns on items like clothing and shoes increases after the holidays. Not only are more items purchased, but consumers may be more likely to return items they themselves did not pick out. Recipients often need to exchange items for a different size or for item that better fits their taste.
Reasons for returns
Shoppers and gift recipients return items for several reasons. From improper sizes to technical malfunctions, consumers do not hesitate to send back merchandise.
The top reasons for ecommerce returns are:
- Damaged or defective item
- Item does not fit
- Item does not match description
- Ordered multiple items/sizes
- Item arrived late
Brands can prevent some returns by being proactive and ensuring product descriptions and delivery windows are accurate and complete. For the returns that are out of a brand’s hands, there are ways to leverage the returns process to grow business.
Turning Returns into Opportunities
Processing post-holiday returns does not have to be a net negative. In fact, there are many opportunities to leverage the experience and grow business.
Build loyalty
In today’s competitive landscape, building brand loyalty is essential. Returns may seem like a hassle, but handling them efficiently can actually increase customer loyalty. By providing easy and quick return processes, customers are more likely to shop with a brand again in the future. Additionally, offering store credit instead of refunds can encourage customers to make additional purchases.
In the last 12 months, many major brands have restricted or done away completely with free returns. But this strategy may backfire and damage loyalty – especially for new shoppers or gift recipients.
“It’s about brand loyalty in the end,” wrote Alicia Thorpe for Retail Wire. “Companies may think that losing out on money because of returns is a huge problem, but they might end up doing more damage to their reputation by making hasty changes.”
Capture first-party data
Any time a customer or potential customer interacts with a brand, that brand has the opportunity to capture data. The data helps personalise the customer experience or informs future decisions.
Returns interactions offer the same opportunity. Retailers can use the returns process to collect valuable first-party data. Such data includes reasons for return, preferred sizes or colors and buying habits. Brands can use this information to tailor marketing efforts and improve inventory management.
“If you have a large set of first-party data, it can be used to build predictive models to forecast customer behavior, future sales and revenue, churn rates, and more,” wrote Brooke Osmundson for Search Engine Journal. “Using this information strategically guides better decisions made directly from your data.”
Customer reviews, online chat transcripts and website interactions are valuable pieces of data.
Increase upsells and cross-sells
When a shopper or recipient needs to return an item, brands can deploy cross-sell and upsell strategies. When a customer initiates a return, brands can present the shopper with alternative products that better suit customer needs or preferences. This encourages additional purchases which may help offset the cost of the return.
And if the shopper is able to immediately use funds from the returned items, brands benefit even more.
“Instead of resorting to practices whose harsh transaction costs can alienate customers, sometimes permanently,” wrote Chang-Yuan Lee in the Harvard Business Review, “creating return policies and practices informed by the refund effect can be an effective way to reduce the revenue loss incurred by product returns in a way that benefits both consumers and retailers.”
Strategies for Efficient Return Management
To navigate and even capitalise on the post-holiday return surge successfully, brands and retailers with ecommerce channels must implement strategies to streamline the returns process and prioritise customer satisfaction.
Streamline the returns process
- Ensure the return instructions are simple and provide clear guidelines. If there is a return window or restocking fee, brands should plainly display the details.
- Offer multiple return options to accommodate customer preferences. For example, brands can offer returns online or at a brick and mortar store. Brands can also choose to offer online exchanges, refunds or store credit.
- Utilize technology, such as returns management software, shopper return portals and tracking. These technologies automate and expedite the process and keep the consumer updated on the status of the return.
Prioritise customer satisfaction
- Provide hassle-free returns by offering pre-paid return labels or return-to-store options.
- Extend return windows to give customers ample time to return or exchange items. Many gifts were purchased more than 30 days before the gift was received. Letting recipient return items into January improves the experience and satisfaction.
- Train customer service representatives to handle returns with empathy and efficiency. Empower representatives to make decisions in the moment. Requiring representatives to work through red tape damages the customer experience. Brands should reduce escalation requirements when possible.
- Establish a dedicated, localised customer service team to handle all queries related to returns. This team should be trained to efficiently resolve return-related issues, providing clear instructions and ensuring customer satisfaction. Global brands managing returns in multiple markets should localise the customer service experience to each market.
Utilise returns management software and technology
- Offer a self-service, online returns portal and let shoppers start the process as well as track their returns or refunds.
- Implement a returns management system or partner with an existing, experienced logistics firm. Such firms can process returns and provide valuable data that informs planning and strategy.
- Leverage data insights to identify areas for improvement and optimisation. Use data to refine the returns process and reduce future returns.
- Integrate returns management with other systems. Integration centralises all customer information, providing a more complete view of the customer journey. Integration is also a key component of omnichannel strategies.
The Bottom Line
While post-holiday returns can be daunting, brands and retailers have many opportunities to turn the situation into a positive experience. By focusing on reducing returns, building loyalty and utilising technology, brands can make the most out of the post-holiday surge.
What’s more, brands can create a lasting impact on customer satisfaction and retention. So instead of dreading the rising tide of returns, embrace it as an opportunity to grow your business. Continue providing exceptional customer service and leveraging data insights to continuously improve processes and delight customers.
To learn how ESW can help your brand optimise returns and find opportunities, contact us today.
