Wave of Returns Gives Online Retailers a New Year Headache

Retailers are facing an unprecedented surge in online sales, which has lead to an unprecedented volume of orders and deliveries. Unfortunately, they also need to contend with a flood of returns.

Returns cost retailers both lost revenue and time-consuming efforts to resell items again.

Increased Return Rates

Online retail continues to flourish, offering customers the convenience of buying goods without ever leaving their homes. As a result, e-commerce is taking over some of the market share previously reserved for physical retailers. Unfortunately, this growth also brings with it an influx of returns which are driving up costs for many brands.

Due to the overwhelming volume of returns, some brands are considering revising their return policies and how they handle incoming product. One trend particularly prevalent in apparel is bracketing, where customers purchase multiple versions of an item and return only those which don't meet their needs.

This strategy can be beneficial to getting a clear understanding of your product and how to best improve inventory levels. However, it could backfire if it encourages shoppers to place too many orders at once.

Furthermore, high return rates may deter customers if they think that having to reorder an item in the future will be too difficult. This leads to disgruntled customers and reduced sales overall.

Consumers expect brands to provide an easy and convenient returns process. In fact, 96% of customers said that they would shop from a retailer again if it provided either an "easy" or "very easy" return process.

Implementing an accessible and user-friendly returns process can transform the return experience into an opportunity to build customer loyalty and retain revenue. You can do this by creating sizing charts, offering exchanges or store credit, communicating clearly about your products, and tracking why people return them.

Data and analytics can be utilized to pinpoint the root causes of your return rate, helping you reduce them over time. To do this, analyze customer feedback, reviews, social media data, and call center data to understand what customers think about your products.

Reducing your return rate will save you money on shipping costs, refurbishments and repackaging expenses. Furthermore, it gives you the chance to boost profits so that you can reach your financial objectives more easily.

Increasing Costs

Online retailers are facing an upswing in returns this holiday season, as many are struggling to stay abreast of rising expenses.

Due to this cost pressure, many of the top retail brands are experiencing significant margin compression. Target, for instance, reported product costs rose 10.4% last quarter while selling and administrative expenses surged 5.6%. As a result, operating income dropped 43% and operating margin (operating income divided by revenue) declined to 5.3% from 9.9% one year earlier.

Contrary to popular belief, many retailers are still reaping substantial profits from sales. That is, they make money from the gross revenue of their products rather than from the prices they charge customers.

Additionally, these retailers have often charged fees to cover shipping and reverse supply chain expenses that their return policies cause. These costs have a direct effect on customer satisfaction as it often leads to unhappy customers leaving reviews about the company that charged them for returns.

Additionally, customers carefully consider the return policy when making their purchasing decision. According to a recent FarEye survey, 95% of respondents said they would be wary of shopping with a retailer who charges for returns.

These fees may help reduce overall returns, but they also have an adverse effect on revenue as they eat into profit margins. Fortunately, retailers can employ several strategies to enhance their returns process and minimize these costs.

Stricter returns policies that encourage customers to bring items back in-store instead of mailing them in can be an effective strategy. Other strategies include shorter windows, stringent eligibility requirements and in-store return incentives.

In addition to cutting costs, these strategies can also increase sales and foster customer loyalty. Zappos, for instance, provides free returns that guarantee 75% of its customers become repeat buyers.

Retailers are increasingly investing in technology-based solutions to streamline and enhance their returns processes. Happy Returns, for example, provides a solution that makes it simpler for customers to drop off returns at local stores without needing a shipping label - saving time and shipping expenses while increasing consumer satisfaction.

Changing Customer Expectations

One of the major challenges online retailers face is meeting and exceeding customers' expectations. They need to deliver on every touchpoint along the customer journey, from search and product availability through delivery and returns.

If they don't, customers will quickly move on to another vendor that can offer a more seamless experience. That means you only have so long to impress them and ensure they keep coming back to your store.

Fortunately, there are steps you can take to guarantee your company meets customers' needs and remains competitive. These include integrating your omnichannel experience, providing self-service resources and developing a systematic process for handling return requests.

Customer expectations are constantly shifting, so companies that can keep up will be best equipped to meet them. By focusing on the customer experience, you can build long-lasting relationships based on authentic and meaningful interactions with your clients.

Due to the COVID-19 pandemic, consumers have adjusted their shopping habits and many are turning away from traditional brick-and-mortar stores toward online sales. While this trend shows no signs of abating, it presents challenges for retailers who wish to maintain high levels of customer loyalty.

For instance, if customers aren't satisfied with their order, they're likely to search for a retailer that provides multiple return/exchange options. Furthermore, they might be more willing to pay for faster shipping options like next-day or same-day delivery.

Your customer service team plays an essential role in ensuring your products are available and easily accessible on your website. Not only does this cause frustration for customers, but it could be detrimental to the image of your brand as well.

To avoid this, you need to be able to update your product inventory rapidly so that customers always have new options available. Doing this allows you to adjust according to demand changes and help customers avoid purchasing the wrong item.

Furthermore, customer service teams should be able to handle inquiries from any channel, so that they don't have to switch channels every time a customer has an inquiry. By implementing an omnichannel customer support solution that integrates social media, live chat, email and more into one platform, your teams can deliver the same great experience for all of your customers no matter where they are located.

Changing Channels

Online retailers are facing a major challenge due to the evolving channels they must use to sell their goods. Traditionally, there were two types of retail channels: brick-and-mortar stores and e-commerce. But about 25 years ago, online retail began taking off and consumers began shifting their purchasing patterns accordingly.

This shift has seen a shift from two-channel to multichannel shopping, where consumers buy goods across different platforms. This development is still ongoing and companies must stay abreast of it if they hope to remain successful in the future.

Adding new channels can provide access to new audiences and volumes quickly, as well as manufacturer discounts and other advantages that increase margins. Unfortunately, breaking into a channel is often challenging and costly; thus, you'll need to invest both time and resources in order to be successful.

There's also the risk that some channels may not be suitable for your brand. Some can lead to an unpleasant customer experience and contracts that favor retailers over you.

Particularly if your DTC brand is relatively new, having a strong foundation and established customer base before adding another channel can give you significant leverage in contract negotiations.

By doing this, you can negotiate better terms for your brand and take control of the narrative that surrounds what, where, and how your products are sold to retailers. This makes your brand more desirable to retailers while helping prevent those unpleasant conflicts we discussed!

When creating your marketing strategy, it's important to consider the type of customers you are targeting. Certain channels have very specific audience demographics that should not be crossed off. For instance, eBay buyers tend to be older and wealthier; you don't want them coming across with a cheap t-shirt and low price tag!

Amazon shoppers tend to be younger and more casual. You should therefore tailor your offerings to their needs and interests, including providing shipping options that fit into their busy lifestyles.

It is critical to comprehend the audience and characteristics of each channel before entering them. Doing this will enable you to succeed while maintaining sanity!