The first quarter of the year presents a unique challenge for retailers. The period after Christmas always brings with it a deluge of returned items that must be processed. Unwanted Christmas gifts and items that were bought on the spur of the moment in the Boxing Day sales make the first quarter one of the most complex times of the year from a returns and reverse supply chain perspective. That said, the returns process is an integral part of the customer buying cycle. From small businesses to large brands, returns play a crucial role in the overall customer experience, whether you sell electrical goods, clothing or homeware. When the returns process is properly managed, it often results in higher levels of customer loyalty and increased long term profitability.
The Retail Landscape
In recent years consumer buying habits have changed. Products such as fast fashion and small electrical items such as Smartphones and accessories has placed an increasing strain on retailers in terms of the returns process. The whole retail landscape is changing, even more so in 2020 with the Covid-19 pandemic where sitting rooms are becoming changing rooms or showrooms where consumers can test and try products before they commit to buying them. When customers buy online, they will have certain expectations of the product in terms of quality, appearance, features and more. Sometimes though, what consumers see online isn’t always what they get in reality.
The Real Checkout
In some situations, the product that the customer receives is far away from the idea they had at the time of completing the purchase. There is a gap between perception and reality. When products fail to meet expectations there is always an increased demand for returns. However, there are some things that retailers can do to reduce false expectations such as providing accurate size guides on websites for clothing, offering detailed product descriptions and using technology such as augmented reality. All of these things give the customer detailed information so they can make a more informed buying decision.
Even if the product meets expectations upon delivery, the consumer may decide to return it for a variety of reasons other than something to do with the quality of the product or a fault. The customers who regularly return products are often more loyal and valuable so it’s worth keeping this in mind. When your returns process is both convenient and efficient, returns are no longer a burden for retailers, they are an opportunity to retain customers.
Managing Returns
Retailers who embrace the returns process can clearly set themselves apart from the competition, retain a bigger market share and reduce churn. There are three ways that returns can be managed in the most effective way.
Be Generous with Returns Policies
It may seem counterintuitive but having a generous returns policy can actually boost customer loyalty. Customers who have frequent product return rates are often the most profitable. Take away the returns process and they will most likely shop elsewhere.
Be Efficient
The returns process must be seamless from the customer’s perspective. Retailers can achieve this through automation and software. When retailers invest in an efficient returns process, this shows customers that you care, and you are committed to earning their repeat custom despite the return. The best solution will allow retailers to gain in-depth insights into the returns process, turning stock around quicker and in a more intelligent way.
Analysis
The third strand to the returns management process is to monitor results through careful data analysis. As well as processing returns, metrics should be gathered to analyse who returned the product, what was returned and most importantly why. Encourage customers to leave a comment or feedback on the reason for the return form and make sure that this information is collected and recorded when the return is processed by the customer care team.
A strong returns system will enhance the consumers experience of a brand-boosting both short term customer satisfaction and long term customer service standards.
Even with an effective returns process, retailers still face the problem of what to do with the returned stock. There are three main areas that require consideration in the reverse supply chain:
- Disruption and pressure in the supply chain
- Challenges associated with trapped inventory and a requirement for eCommerce
- Investment in the overall eCommerce experience
The Adoption of Recommerce
An investment in technology and processes can, without a doubt manage large volumes of returns. But what happens to all the stock once it has been returned? Recommerce is an important consideration, particularly in a world of Covid-19. Many stores are closed or are only open partially and they are unable to sell open boxed or excess goods. Many outlets have closed down completely so it’s important that retailers have online commerce options to resell customer returns, open box items and surplus stock.
According to the executive director of Reverse Logistics Association, Tony Sciarotta, there is between $250 and $350 billion worth of returned products that are just floating around. This is a huge amount of waste. As the demand for eCommerce has grown significantly, retailers have found that their operations are becoming increasingly stretched to deliver online purchases to consumers, leaving little to no time to deal with the backlog of returned products and this creates a problem of what to do with all the returned items. One solution is the concept of reCommerce which is sustainable and cost-effective.
When goods are returned, it’s not an attractive prospect for a retailer to transport these rejected items to different locations, particularly when the products are costly and/or bulky items such as furniture. In addition, many of these returned items cannot be resold ‘as new’. For goods returned due to a minor fault or defect, rather than shipping these goods back to the manufacturer for repair, retailers can generate revenue instead by adopting the reCommerce model and selling the products as ‘second hand’.
This type of sustainable selling appeals to certain groups of consumers. Younger consumers in particular find the circular economy attractive and express an interest in shopping with sustainable and environmentally friendly businesses. As well as selling returned goods at a discount, re-commerce goes much further, extending to repurposing and refurbishing all kinds of goods.
Rather than trying to set up this model alone, retailers can forge partnerships with reCommerce platforms. When it’s approached in the right way, re-commerce can be a powerful and profitable way to manage the returns process that’s cost-effective and kinder on the environment.
