There’s no question that online shopping has transformed Australian retail. But, at the same time, it has also brought a challenge that many businesses are still struggling to solve: product returns.
Once, it might have been a relatively small operational task for retailers. However, now it has gradually become a significant expense for businesses selling everything from fashion and footwear to electronics and homewares.
Indeed, many attempt to counter it by tightening their returns policies or introducing extra fees. Such measures may reduce costs in the short term, but they can also discourage future purchases, which ultimately could hurt your bottom line.
Increasingly, more and more retailers are discovering that the returns experience can influence whether a customer comes back or shops elsewhere. Subsequently, rather than treating returns as an unavoidable expense, many are starting to see them as an opportunity to strengthen customer relationships and even increase their long-term revenue. Let’s take a look at how.
Why are product returns such an issue?
The rapid growth of online shopping has naturally led to higher return volumes. According to GWI, some 60% of those who have bought a product online in the USA or UK returned at least one product in the last 12 months.
One of the main reasons is that there is sometimes a bit of guesswork involved in a purchase. Customers, for example, cannot try on clothing, inspect products in person or compare sizes before buying. So, it is perhaps understandable that returns have become part of the online shopping experience.
At the same time, retailers are having to deal with rising freight, labour and warehouse costs. Additionally, every returned item must be received, inspected, repackaged and restocked. In some cases, products arrive back in a condition that cannot be sold as new, if at all, which results in another financial loss.
Equally pertinent is that the cost extends beyond logistics. A poor returns experience, for instance, can severely damage customer confidence. This can lead shoppers to choose to spend their money with another retailer next time. Because acquiring a new customer is often far more expensive than retaining an existing one, customer loyalty is an increasingly valuable commodity.
It is important for retailers to recognise that when operating in a competitive market, every interaction after the sale can influence future purchasing behaviour.
Is it time to rethink the way retailers handle returns?
Many retailers still view returns as a minor inconvenience. However, while reducing unnecessary returns remains important, concentrating solely on cutting costs may cause them to overlook a much bigger opportunity.
In a nutshell, customers always remember how businesses respond when something goes wrong. If they experience a simple, hassle-free return process, then it can leave a positive impression on them, even if the original purchase was unsuccessful. On the other hand, if they have to negotiate slow refunds, navigate confusing policies, or endure lengthy approval processes, it can quickly erode their trust.
This consequence has encouraged retailers to invest in technology that removes, or at the very least reduces, unnecessary delays from the post-purchase experience. One such solution is Refundid's Checkout Plus, which demonstrates how the payment and returns journey can work together to create a smoother customer experience.
Ultimately, providing customers with faster refunds and streamlined processes can increase their confidence, which should make shoppers more comfortable about purchasing again from the same retailer. Indeed, retailers that treat returns as part of their customer experience rather than an isolated operational task are often better placed to encourage repeat business.
How can a better returns experience lead to more sales?
Many businesses think customers predominantly judge a retailer by the products they sell. But this isn’t necessarily the case. They also remember how problems are handled, which arguably holds greater significance to them.
A customer who receives a prompt refund after returning an unsuitable item is far more likely to give that retailer another chance. Often, this is because they recognise that a business stands behind its products and values the shopping experience.
At the same time, the amount of confidence shoppers have in the company is very important. If they know the returns process will be simple and quick, they usually feel much more comfortable completing an order. Particularly for higher-value items or products where sizing can be uncertain.
This confidence can reduce any hesitation customers hold about making a purchase because, instead of worrying about potential problems, they can focus on finding the products they want. Crucially, the savviest retailers realise that while this current return may not generate profit, the customer's next purchase often does.
What do shoppers expect when returning an online purchase?
Over the past decade, consumer expectations have changed considerably. Whereas once they might have put up with delays, today's shoppers generally expect returns to be straightforward, with minimal paperwork and regular updates throughout the process. They also expect refunds to arrive quickly once their return has been approved.
For them to enjoy a positive experience, retailers will have to ensure they receive:
- easy-to-understand return instructions;
- multiple return options where possible;
- fast acknowledgement that a return has been received;
- timely refunds; and
- friendly customer support when assistance was needed.
These expectations may seem simple. But consistently meeting them can influence factors such as whether customers recommend a retailer to friends or leave positive online reviews. In short, the returns process has become another opportunity to demonstrate excellent customer service.
How can retailers turn returns into a competitive advantage?
While it is still important, price is no longer the only factor influencing buying decisions. Instead, customers are increasingly comparing the entire shopping experience before deciding where to spend their money. This is vital because a retailer known for fair and convenient returns may still attract customers even if its prices are slightly higher than those of its competitors.
Another thing to be aware of is that returns can also generate valuable insights. That is because businesses that regularly analyse return reasons may identify recurring product issues, sizing inconsistencies, or packaging problems as the primary factors. The more effectively they address these concerns, the more they can reduce future returns and improve customer satisfaction.
Cleverly, some retailers also use returns as an opportunity to reconnect with customers. Primarily through personalised offers, loyalty rewards, or product recommendations that better match previous purchases, thereby encouraging further sales.
