Is Your Returns Process Helping or Hurting Your Customer Experience?

Custom content for Optoro by studioID

Consumer shopping behavior changed significantly in 2020, but those changes didn’t just affect how consumers made purchases. They also affected how consumers returned them.

Even before the pandemic, returns were growing year over year. In 2018, consumers returned $369 billion in online and in-store retail purchases. By 2020, that number jumped to $428 billion.

Last year, e-commerce buying surged — and so did returns. Given that online returns were already three to five times higher than the rate of in-store returns, this would present a problem at any time.1 But with many brick and mortar locations closed due to the coronavirus, and with as many as 30% of online purchases ordinarily sent back to the store, retailers were in a quandary.2 The sheer increase in the volume of returns, coupled with store closures, meant retailers had to pivot quickly to develop new strategies to handle returns.

Some retailers adjusted returns policies or implemented technology to make the process simpler for customers and less expensive for retailers. As retail stores began to reopen, some added additional physical locations for customers to make returns, regardless of whether the purchase was made in-store or online.

While these changes helped retailers survive a crisis, they shouldn’t be seen as only a short-term solution. As consumers quickly adjusted to these changes and the convenient new ways of buying and returning, they expect these services in the future. They aren’t going to be satisfied with being limited to the traditional options.

But even though some retailers adjusted their strategies to make returns less painful for consumers, many retailers did not. Retailers’ handling of returns has always played a critical role in the customer experience, yet this aspect remains a blind spot for many retailers. With the changes in consumer behavior hastened by the pandemic, those retailers slow to implement strategies improving the returns process risk losing customers to competing retailers who developed an effective, proactive response.

16%INCREASE

2018 RETURNS

2020 RETURNS

$369B

$428B

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Retail Dive studioID and Optoro, Inc. surveyed nearly 300 retail leaders from the Retail Dive audience to get a perspective on how retailers handle returns. The results highlighted a disconnect that retailers have between returns and customer experience.

For example, although retailers may invest in the consumer shopping experience, most do not focus on returns as part of that customer journey. The survey found that:

At 69%, the majority of retailers agreed that returns affect the customer experience. The survey also indicated that retail leaders might not be fully informed about the financial effect of returns. While most said their returns volume increased in 2020, 13% weren’t sure. Furthermore, nearly one-third (29%) said they did not quantify the full cost of returns.

These survey results are a small sample, but they point to an alarming trend: Retailers may not completely understand how returns affect their customers — or ultimately, their business. As a result, retailers miss the opportunity to win and keep customers during this still volatile time.

As retail leaders look at the remainder of 2021, they must determine if their returns policies help or hurt their efforts to create an outstanding customer experience.

Where Are They Now? Retailer Returns Policies Show a Disconnect with CX

of respondents did not plan to adjust their returns policy.

had no plans to have a drop-off location for new returns.

did not intend to have portals for online returns.

were not planning to add returns-processing technology.

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43% 64%

45%53%

Consumers and retailers agree: returns are a headache. But when consumers must make a return, their experience during that process can make – or break – their relationship with the retailer. An earlier Optoro survey found that 89% of people said that a negative returns experience would make them less likely to shop with a retailer or brand.3 The same survey found that 97% of people would be more likely to purchase from a store after they had a positive experience.4

“Retailers need to recognize that returns are now part of the customer journey,” said Ben Sayles, strategic retail solutions advisor at Optoro.

“Returns are something customers expect to be able to do seamlessly,” he added. When buying apparel online, for example, customers may buy the same item in two sizes if they’re unsure which one will fit better. In this instance, the intention is to return one of the two items. Although much focus is on online sales, in-store sales are also at risk for being returned, even on purchases a customer has tried out or tried on.

Returns as Part of the Customer Journey

of people said that a negative returns experience would make them less likely to shop with a

retailer or brand.

of people would be more likely to purchase from a store after they had a

positive experience.

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97% 89%

“If retailers don’t have a seamless, flexible, convenient experience, the customer will be frustrated, and next time they’re shopping, they’ll look for a retailer that offers the experience they are looking for,” Sayles said.

“Consumers who have negative experiences can make it even worse for retailers by giving a negative review or complaining through word-of-mouth or social media,” he added.

For some customers, a retailer’s returns process doesn’t just influence future sales — it affects the initial sale. Optoro research found that nine out of 10 people who had recently made a return checked the returns policy before they made the purchase.5

Given how vital the returns process is to consumers, why aren’t retailers paying more attention? “It’s complicated,” said Ken Lim, senior vice president of client development at Optoro. “Returns are often a forgotten part of retail. It’s not necessarily the most glamorous portion

of the retailing effort. Unlike forward and merchandising and selling, reverse is just plain messy.”

That messiness comes from uncomfortable conversations with dissatisfied customers, as well as in the multiple functions that are involved with returns, he explained. Once retailers hit a certain scale, they have dedicated functions, such as customer experience; customer care; merchant, web and product teams; supply chain; and finance teams. While each function works to optimize its area, no one is drawing full connectivity between all of them. One function may look at customer-satisfaction scores, one looks at returns rates and another looks at customer loyalty. Still, none of them looks at the effect returns have on the consumer and the business. “Drawing that correlation is a lot of orchestration. It’s a lot of mental horsepower and intentional effort for retailers to decide that they’ll invest if they want to do it well,” Lim said.

“Returns are often a forgotten part of retail. It’s not necessarily the most glamorous portion of the retailing effort. Unlike forward and merchandising and selling, reverse is just plain messy.”

Ken Lim Senior vice president of client development Optoro

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Nine out of 10 people who had recently made a return checked the returns policy before they made the purchase

Retailers might act more swiftly to improve their returns processes if they knew the actual cost of returns. “Recognition starts when retailers notice a spike in returns and understand that this is the new norm,” Sayles said. “But when retailers think about the cost of returns, they may unintentionally lowball the amount because they don’t see the full picture or don’t have the ability to capture expenses accurately.”

“They’re just able to measure the physical handling portion of it, not the full returns journey, which includes call center costs, including the cost of customer churn, customer dissatisfaction for returns service and so on,” Lim added. Calculations should also include aspects like:

• How much is spent processing/shipping returns? • What are contact center costs? • How manual is the process, and what does that cost? • Are routing decisions optimized for efficiency? • How do the retailers’ returns policies encourage swift

returns to allow for reselling during the same season?• How well do returns policies provide opportunities

to save the sale?

“If retailers are looking inward, they should realize how expensive it is for the volume of returns that they have today,” Sayles said. “If they’re already behind, what’s it going to look like in three years? Retailers must see that they’re spending a whole lot of money on just processing returns. They have to ask themselves how they can automate and streamline the process to make that part of the business better.”

“If retailers are looking inward, they should realize how expensive it is for the volume of returns that they have today.” Ben Sayles Strategic retail solutions advisor Optoro

Calculating the Cost of Returns

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When many retail stores were closed during the pandemic, some started thinking of what the returns experience should be once stores reopened.

“Retailers started rethinking the interaction of a customer walking into a store to return an item,” Lim said. Retailers began leveraging curbside pickup to allow curbside returns and thinking about package drop-off locations to give customers more ways to return that didn’t require coming indoors.

“Retailers are re-imagining the first step in the returns journey,” Lim added. Before, a customer returning a purchase to an e-commerce business might need to call customer service to get approval for the return. Then they would hunt around the house for a box and tape, print a label — if the customer owned a printer — and take the return to the nearest post office. “Now, retailers that may have been historically very reluctant to come away from their good old returns-label-in-the-box type of methodology are starting to think about activating a digital returns portal,” he said.

“Now, retailers that may have been historically very reluctant to come away from their good old returns-label-in-the-box type of methodology are starting to think about activating a digital returns portal.”

Ken Lim Senior vice president of client development Optoro

Re-Imagining Returns

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As retailers develop strategies to address returns, they should prioritize these factors:

Change the mindset about returns, recognizing that they are an opportunity to win customers and improve financial results. Returns don’t belong to one function in a retail store. A dedicated team or a cross-functional team needs to be invested in the positive outcome.

Implement a reliable returns technology that has the backbone in the physical infrastructure to accept returns and handle disposition management. That means inspecting an item, determining how quickly it can get restocked, assessing what to do with things that cannot be restocked and deciding on which secondary channels to use to dispense with those.

Invest in a returns-initiation process, such as a returns portal, making it convenient for the customer to send or take an item back to the store. From a retailer’s perspective, the sooner an item is returned, the better chance of restocking and reselling the item. Additionally, a returns portal makes it easier for retailers to anticipate when and where an item will be returned, so they can plan what to do with it next.

Use a returns portal for more than returns — use them to save the sale. With portals that offer instant credit, retailers can issue refunds, even before the item has returned to the facility, making customers happy. At the same time, retailers can offer customers an immediate alternative to the product they are returning. Since customers have their money in hand, they are more likely to make that purchase. So even though the first item gets returned, the customer ends up buying a second item and feels satisfied with the experience.

Develop a methodology for routing a return. It is essential to make sure stores have a good mix of drop-off nodes so that not only can the customer drop something off quicker, but the retailer can also pull the product back into the facility faster.

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“A returns strategy isn’t just about managing cost, beyond the costing elements, retailers should also think about how to delight customers, lift revenue and save the sale.”

Ken Lim Senior vice president of client development Optoro

“A returns strategy isn’t just about managing cost,” Lim said. “Beyond the costing elements, retailers should also think about how to delight customers, lift revenue and save the sale.”

“Once retailers accurately measure costs and then implement a returns strategy, they can use multiple ways to measure success,” Lim said. The time it takes to get the product back from the customer or to refund the customer — these become ways to delight the customer and build loyalty. Customer satisfaction and customer churn are also essential indicators and affect the bottom and top lines.

“Retailers are at a critical point,” Sayles said. “Many retailers don’t understand that if they aren’t focusing on the returns process, all they’re doing is pushing shoppers away. That’s the bad news. But the good news is, if retailers do invest in returns and they offer something that really stands apart from the competition, such as exchanges with alternative product suggestions, multiple drop-off locations, or streamlined, easy returns in the store, they’re offering something far better than many of their competitors. That will create a positive experience and drive retention and loyalty.”

The consumer shopping behaviors seen in 2020 are here for the long term. As retailers look into the remainder of this year and beyond, they must recognize that returns are a part of the consumer journey. With that mindset, retailers need to create strategic returns processes that benefit the retailer’s top and bottom lines while offering a delightful customer experience.

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1. Optoro User Research & Analytics (2016-2019)

2. Danziger, Pamela. “Holiday Sales Will Break $1 Trillion This Year, Meaning Retailers Must Also Prepare For Record-Breaking Returns.” Forbes, 21 Nov. 2019, www.forbes.com/sites/pamdanziger/2019/11/19/how-retailers-can-take-the-pain-out-of-customer-returns/#26f380dc117f.

3. “Retail Returns and the Consumer Experience: Leveraging Returns as a Competitive Advantage.” Optoro.Com, 2018, info.optoro.com/hubfs/WBRConsumerReturns2018OptoroReport_2020.pdf.

4. “Retail Returns and the Consumer Experience: Leveraging Returns as a Competitive Advantage.” Optoro.Com, 2018, info.optoro.com/hubfs/WBRConsumerReturns2018OptoroReport_2020.pdf.

5. “Retail Returns and the Consumer Experience: Leveraging Returns as a Competitive Advantage.” Optoro.Com, 2018, info.optoro.com/hubfs/WBRConsumerReturns2018OptoroReport_2020.pdf.

Sources

Optoro is the leading provider of returns technology for retailers and brands, using data and real-time decision-making to make returns better for customers, retailers and the planet. From an easy, online customer returns portal to warehouse processing and resale, we offer powerful solutions to improve outcomes across all points in the returns process. Retailers and brands — including Best Buy, Ikea, Target and Staples — trust Optoro’s solution to make returns a strategic advantage for their business and enable sustainability initiatives across their supply chain.

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