This post is by Nick Maglosky, CEO of ecomdash. Ecomdash is a smart, multichannel inventory, order, listing and shipping software for online retailers. Nick is passionate about small to mid-sized businesses and all things ecommerce, and enjoys researching innovative ways retailers can compete online in an increasingly diverse market.
Though ecommerce businesses and strategies vary across industries, there’s one thing just about all retailers can agree on: returns suck. It can feel like the death of a sale, and it’s a hassle to process.
Though some buyers want to bury their return policy in hopes of dissuading returns, know that an easy returns experience yields future orders. Studies show that of the 60% of online shoppers that make at least one return or exchange per year, 95% will make another purchase if the return experience was positive.
So even if it feels disheartening, it could be the catalyst for future sales and repeat customers. Keep in mind that:
- Repeat shoppers account for about 40% of all online sales.
- Online businesses with 40% repeat customers generate 50% more revenue than similar sellers with a 10 % repeat customer base.
- The conversion rates of loyal customers are 5 – 9 times greater than first-time buyers.
- Businesses that boost customer retention by 5% saw an increase of profits between 5 and 95%.
Creating an easy-to-follow and generous return process will improve sales in the long run. Here’s how to establish a process that stewards repeat customers and encourages new buyers.
Overcoming the emotional element
First off – a return is not a failure. It’s an inevitable part of running a business – particularly one that is online, where shoppers cannot test, touch, or try on products before buying.
Stave off the instinct to feel like returns are a loss or attack on your business, and try to see this as an opportunity for more sales in the future. Think of how your buyer may feel – they could be upset that the item they were anxiously waiting for is not the right size, color, or model.
The item could have been a gift they were excited to give someone, and sadly it turned out to be a bust. These buyers are probably expecting the worst out of the return experience. Reassure them that you understand, and that you’re going to make this as easy as possible. Their low expectations actually give you the opportunity to far exceed what they imagined, and provide them with a superb return experience.
Try to figure out what went wrong – both so that you can resolve the issue at hand, and prevent this type of problem from happening again. This is an opportunity to improve upon your business and ensure an exceptional buying process for all customers.
How much does a return cost?
In order to remove all emotion and approach returns as a necessary evil (so to speak), you need to determine the cost elements of returns ahead of time and factor these numbers into your budget. That way, in the event of a return, you’ll be able to deal with it objectively and effectively, having made allowances in your business expenditure to handle returns.
Factor in the costs of free return shipping and implement it as part of your return policy. The thought of paying for shipping items back to you may make you uncomfortable at first, but it will benefit your business overall.
A reported 49% of consumers consider shipping costs to be the most “exasperating” part of the returns process. Another study found that 88% of consumers surveyed would rate free return shipping as “important” or “very important” when making purchase decisions, and 82% of another test group said they would complete an online purchase if the retailer offers free return shipping.
Take a look at your historical order data, and determine which of your products tend to have high sales and rates of return. When planning out your budget, factor in the shipping costs to send these items both ways – to the buyer, and back to you in the event of a return. The more clinically you can approach returns, the easier they will be to handle on your end.
Segments that have the most returns
Surprisingly, online-only companies are reported to have the lowest return rates of Internet Retailer’s Top 500 merchants. Both Internet Retailer’s findings and other studies show that most online sellers experience a rate of returns at less than 5%.
That said, one industry that shows much higher return rates is fashion and textiles. A reported 61% of online fashion retailers have a return rate higher than 25%. To compare how rate of returns differs across industries, note that 48% of online fashion return rates are in the 25%-50% range, whereas only 4% of retailers in other industries have return rates that high.
Other apparel and soft goods retailers tend to see high return rates as well, with about 20% to 30% of all sales resulting in returns. That’s compared to the return rate of less than 10% for hard goods like home products or toys.
Given that fashion and apparel require fitting and are subjective to style, it’s not entirely unexpected that these types of products would see higher rates of return. To proactively prevent returns in textile industries, mitigate the reasons buyers seek returns. These suggestions will reduce the risk of returns across industries.
- If buyers are returning because they received the wrong product or item color, determine any issues in your warehouse chain of command or packing strategy. Are bins not properly labeled? Do your pick lists need better clarity?
- Make sure your descriptions are detailed. Include dimensions, materials used, how the item may appear in natural light vs. how it appears in brightly-lit product photos, if assembly is required, etc.
- Take multiple photos of the item from different angles, in different light, and in mixed use. Some should be against a white backdrop – others should be photographs of the item in its intended state. If you sell apparel, share pictures of the garment on a model, if possible. Disclose the height of the model and what size they are wearing, so that buyers can get a sense of how it might fit on their bodies. 360 degree rotating images are also worth adding, and may even increase conversions by 27%.
- Be very upfront about the quality of a product. If an item is vintage and shows some wear and tear, disclose this and which parts show previous use. When shopping for apparel, 59% of buyers will return the item if it doesn’t meet their aesthetic expectations and looks cheap.
Returns strategy for your website
A reported 68% of customers will stop supporting a brand if they feel that company is indifferent towards them. This indifference comes as a result of poor customer service and a difficult returns experience. To combat this, ensure buyers have a simple and efficient returns process from start to finish.
Remember, studies show that of the 60% of online shoppers that make at least one return or exchange per year, 95% will make another purchase if the return experience was positive. It’s in your best interest to make sure the process is effortless. To accomplish a simple returns process, make the following adjustments to your website.
Your policy is clear and easy to find
Don’t bury it on your website. Link to the policy and process from your homepage. You may even consider making it a sticky link that buyers can reach from any page on your site. List step-by-step instructions on how to complete a return, and provide buyers a list of what you’ll provide, like return postage. Make sure your contact information is readily available. Zappos.com has a great returns policy and process.
Returns are free
Zappos.com, master of ecommerce customer service, offers free, unconditional shipping and returns – something you should implement into your strategy. Craig Adkins, Zappos VP of Services and Operations, shared that customers buying the most expensive shoes also have a 50% return rate. These shoppers are “the ones that spend the most money with us and are our most profitable customers,” Adkins said.
Like we’ve learned, repeat customers account for 40% of all online sales. These are the shoppers you want to steward, and a free and easy returns process will ensure their loyalty. Factor this cost into your budget planning so that you’ll be able to guarantee repeat customers even after a return.
Bring the policy to them
Once your returns policy is easy to find on your website, try communicating it to your customers in additional ways. Insert instructions on how to proceed with returns into your packing slips, and consider adding it to an order confirmation email. It won’t encourage returns – it will just make buyers feel confident shopping from your business.
Returns strategy for marketplace sellers
While marketplace sellers may lack some of the autonomy that storefront owners do when it comes to setting a return policy, there is still opportunity to encourage repeat customers. Regardless of which marketplace you sell on, your policy should at the very least match the marketplace policy. This is particularly true for the two largest online shopping sites, Amazon and eBay.
When a buyer submits a return request on Amazon, sellers have two business days to respond before a buyer can file an A-to-z claim. You’d need to email a return label within 5 days after the return request was submitted. On eBay, you must refund the buyer within 6 business days of receiving the returned item. If the buyer requested a replacement item, you have 5 business days to send it after receiving the request.
As a rule of thumb, be generous with returns and give buyers the benefit of the doubt. In most cases, a buyer will not return an item or request a refund as part of a scam. Offer free returns, and make it easy on the buyer to complete the return.
Remember, marketplace buyers are the customers of the marketplace – not yours. You need to maintain the professionalism and customer service etiquette of the marketplace in order to remain in good standing and avoid suspension. If you are worried about buyer scams, take pictures of your most expensive items before shipping them out. If a buyer requests a refund or return due to a damaged item, you’ll have pictures to help prove your case.
Both eBay and Amazon have been encouraging sellers to broaden their market base and serve international buyers, and with good reason. A bigger customer base often yields more sales, particularly in international countries where products may be unavailable or too expensive for local shoppers. As a result, both Amazon and eBay rolled out logistics programs to assist sellers who want to ship goods internationally.
Much like the rules regarding domestic returns on marketplaces, international sellers must abide by the polices set by Amazon and eBay. With the exception of rare cases, eBay’s Global Shipping Program, which operates as a fulfillment service for international orders, does not support returns. It falls upon the seller to set a policy and abide by the regulations regarding returns in each nation.
Amazon forthrightly states that international sellers must accept returns, as described by the following from their website:
When listing in an international marketplace and fulfilling items on your own, you must either (i) provide customers with a local return address within the country of their Amazon marketplace website or (ii) offer them free shipment for returns. This is a requirement to sell on Amazon’s marketplaces.
In cases of low-cost items, it may be best to just write it off and issue a refund when an international return request is received. The cost of providing return postage and shipping a replacement can easily exceed the value of the product.
A comprehensive post on the regulations and logistics regarding international returns can be found in Options for Handling International Returns.
If you sell on your own website, the first thing you can do today to improve your returns process is make sure your policy is clear and easy to find.
It’s still early in the year, so take a look at your budget for 2016 and determine a chunk of your funds that can go towards offering free returns and exchanges.
And don’t be afraid to make returns easy. You won’t encourage returns – but you will strengthen your sales.