[Updated post from April 14, 2021]
It’s always satisfying to watch freshly-packaged orders leave your warehouse. But what happens when some of those orders bounce right back?
According to the National Retail Federation, the average e-commerce return rate in 2022 was 16.5%. This marks a significant drop from previous years when online returns were as high as 21%. However, this still marks a significant loss of revenue for brands.
So, while a high return rate in e-commerce is nothing new, it’s never been more important for businesses to know how to process returns effectively. Effective reverse logistics can be the difference between a customer choosing to make a purchase – or choosing to purchase from one of your competitors.
Yet many brands end up with a cumbersome, complex returns process that fails to meet customer expectations for seamless, hassle-free returns. Why? Because they’re falling into the trap of making one or more of the common mistakes that impact the customer experience and future sales.
We’re going to dive into these e-commerce return mistakes, and what your business can do to remedy them and strengthen your returns management strategy.
All online retailers have some form of e-commerce return policy to stay compliant with consumer protection laws. However, return policies can vary widely in terms of what they cover.
In addition to explaining return windows, a return policy should provide clarity on what products can be returned, the necessary condition for returned items, and the process for completing the return.
If a policy doesn’t clearly outline the process or requirements to make returns, this can lead to confusion and delays in processing returns. There is a risk of having to accept damaged or defective products if your return policy doesn’t guard against this. If you aren’t able to resell returned merchandise quickly, this has a huge impact on profitability due to the return costs of repairs or reticketing.
Your return policy must stipulate the condition that items need to be returned in. This may include products having labels attached, still in their original packaging, and being unworn.
Certain items shouldn’t be eligible to be returned. For example, underwear, swimwear, and jewelry cannot normally be returned or exchanged due to hygiene concerns. Items that are listed on final clearance sales may also be exempt from returns to avoid dead stock from accumulating. If a product is exempt from your return policy, this must be listed on the product page.
Your policy may also want to distinguish between returns and exchanges, or between purchases made in different sales channels. For example, if you have both an online store and a brick-and-mortar store, you may want to stipulate different return conditions depending on which channel they purchased in. Online purchases deserve a bit more flexibility, considering that customers cannot try the item before purchasing and are more likely to buy the wrong item. In-store shoppers get to test and try products in the flesh, meaning they shouldn’t need to return items due to incorrect color or size. So, you may want to only offer store credit on purchases made at a physical store.
For more tips, read our guide on how to write an ecommerce returns policy.
There can be a lot of pressure on e-commerce merchants to remove friction from the return experience by shouldering the cost of return shipping. While free return shipping will certainly please your customers, it can result in escalating return processing costs that affect your bottom line.
Moreover, this can also affect consumer behavior by incentivizing customers to take advantage of free shipping policies. For example, if you have a minimum order value for free shipping, customers may buy additional items to qualify – only to return those unwanted items later for free. This can make the cost of returns unmanageable, especially for small businesses.
It’s worth noting that free return shipping could be inflating your return rate. When there are no barriers to returning merchandise, customers have little incentive to carefully consider their purchasing decisions. This results in a higher volume of impulse buys that may prove unsuitable.
Instead, consider only offering free return shipping in certain scenarios, such as when a product is defective or damaged upon arrival. This helps to provide reassurance to customers that they won’t get penalized for something outside of their control. It’s an acknowledgment that online shopping can be challenging – and that the merchant will support you to fix the problem. This promotes higher levels of customer satisfaction and brand loyalty in the long run.
It’s impossible to manage returns effectively if your business doesn’t understand why they’re happening in the first place. Customers return products for all sorts of reasons, and returns data can tell you about current return trends in your business.
For example, if certain SKUs are seeing a persistently high return rate, this could indicate that your online store needs more detailed product descriptions or imagery to inform purchasing decisions.
If you aren’t asking customers why they’re returning an item, you’re missing out on valuable insights that could help you to increase customer satisfaction. This means your business is left in the dark about how to manage the reverse logistics process, making it difficult to find meaningful ways to improve the customer experience.
To lower return rates constructively, add an online form to the returns process where customers need to state their reasons for returning. You can use this information to make the shopping journey more seamless and hassle-free for your customers.
For example, you might need to improve image quality if consumers keep flagging ‘wrong color’ as their reason for returning a certain item. Likewise, if jewelry or accessories are seeing a high volume of online returns, consider adding a try-on AR filter to give them a better idea of how the product will look when worn.
When designing your return policy, it’s easier to enforce the same rules on all your customers for the sake of convenience. However, this can mean missing out on a valuable opportunity to strengthen customer loyalty.
Long-term shoppers and VIP customers expect that their commitment to your brand will be rewarded in some way. Perks like discounts, early access to sales, and free products give high-value customers an ongoing incentive to keep shopping at your business, instead of going to a competitor.
Repeat customers who have a track record of making high-value purchases may grow frustrated with return policies that don’t provide them with much flexibility. For example, if online stores only provide a limited return window, this may discourage both loyal and potential customers from making more regular purchases.
The truth is that not every customer is alike. So, why should your e-commerce return policy offer everyone the same treatment?
A more flexible return policy helps to reinforce positive shopping behaviors in your customers, such as joining VIP programs, making more frequent purchases, or placing high-value orders. By rewarding loyal customers with more generous return conditions, they’re far more likely to continue shopping with you – especially if these benefits compound over time.
Perks like a longer time limit to make returns, free return shipping, or a home pickup service boosts customer lifetime value and creates happier, more engaged customers with a high intent to repurchase. And because this segment has an established pattern of purchasing behavior, the cost of providing these perks can be offset against future online orders.
Picture this: A customer has made an online purchase and discovers when it arrives that it’s not suitable for their needs. But despite a store location being a short drive away, they aren’t allowed to return their order in-store.
Makes sense, right? Not to your customer.
It’s important to remember that while brands may perceive operational silos between their selling channels, their customers certainly don’t. Impeding customers from choosing their preferred return channel indicates that brands care more about managing inventory than offering convenience, which is increasingly difficult for brands to justify as real-time inventory management becomes more accessible.
Experiences like this add a huge amount of friction to the return experience, as customer returns by mail take much longer to process and offer refunds. When shoppers want to resolve returns as quickly and painlessly as possible, throwing up these kinds of barriers results in poor customer experiences.
As well as enhancing convenience for the customer, in-store return processes have some notable advantages for retailers, too. Returns and refunds can be processed quickly, with returned items immediately available for sale in-store. Store associates also have the opportunity to steer customers toward replacement products that suit their needs, helping to retain more revenue than strictly online returns.
The holiday season has a huge influence on consumer behavior, affecting both online shopping and in-store purchases. When people are buying gifts for loved ones, there’s a risk that any items they buy won’t be suitable and need to be returned or exchanged. For this reason, a brand’s return policy is a major point of consideration for shoppers during the holidays.
However, not every return policy is designed with the holiday season in mind. For example, the return of holiday gifts usually takes place over a longer period than with regular online purchases. This is because the person who is buying the gift is not the intended recipient. By the time a person finally receives their gift and makes the decision to return it, the return window at the retailer may have passed.
If consumers cannot return or exchange their holiday gifts easily, they’re unlikely to feel confident purchasing from your brand.
Giving shoppers the flexibility to choose how and when they return items is one of the best ways to build brand loyalty that outlasts the New Year. With many consumers starting their holiday shopping earlier than ever, a generous return window is vital to ensure that consumers feel comfortable purchasing from you. Consider extending your return window to at least 30 days or longer to give customers plenty of time to navigate the return process.
With online retailers commonly experiencing sky-high return rates, it’s understandable that many retailers are tempted to add friction to the customer experience by discouraging customers from making returns.
These profit-driven tactics can take many forms, including narrow return windows, return fees, lengthy paperwork, or store credit-only refunds. While they might allow businesses to hold onto a bigger proportion of sales, these efforts can easily backfire by driving customers away from your brand.
Today’s consumers have grown accustomed to hassle-free returns, and expect customers to make a serious effort to prolong the customer relationship. If a brand appears to be short-changing customers with complex or restrictive return processes, it’s a clear signal that they aren’t offering a customer-centered return experience. This results both in lost sales and poor customer retention.
Viewing returns solely as a loss of revenue minimizes the role that generous returns policies play in attracting and retaining customers in e-commerce. How a brand chooses to manage returns speaks volumes about the quality of its customer service and whether they are invested in keeping online shoppers happy. A flexible, customer-centered approach to returns not only helps to increase customer satisfaction but also improves profit margins by making customers feel confident to make that first purchase.
E-commerce returns management is a tricky balancing act of maintaining both profitability and customer satisfaction. But you can dramatically improve reverse logistics by avoiding these most common return mistakes that result in either increased return processing costs or unhappy customers – neither of which is good for your bottom line. By implementing the strategies discussed above, you can avoid the pitfalls of returns while also fostering a more loyal and satisfied customer base.