How to Use the Returns Experience to Build Customer Loyalty

Returns. The very word can have eCommerce managers breaking out in a cold sweat. But, they can be an opportunity to create a positive customer experience and build a base of loyal customers. Provided they’re handled in the right way. Keep reading to find out how you can use returns to boost your business and turn customers into loyal fans of your brand.

Returns and customer expectations

A customer returns an item and expects either a refund or a replacement item. That’s all right? Wrong. Customer expectations, especially since the explosion of fast-fashion retailers offering impressive returns services, are now exceptionally high. Companies such as Amazon, Uber Eats, Deliveroo and others have led consumers to expect unparalleled choice, rapid delivery and a quick and successful resolution to any problems.

According to research by fintech company Klarna, 60% of shoppers say that returns are a necessary part of online shopping, whilst between 2017 and 2019 there was a 14% increase in the number of people returning items.

So, like it or not, customers are not only expecting returns to be a default option, but they’re making use of returns in greater numbers.

The business benefits of an effective returns policy

When effectively managed, a returns policy can reap a wealth of benefits for a business. Firstly, there’s the matter of customer loyalty. A survey conducted by Inmar Intelligence found that 72% of consumers would buy again from a retailer that provides a positive returns experience.

But the benefits don’t end there.

Klarna’s research paints a very positive picture for those companies that are able to offer a positive returns experience.

For example, 39% of shoppers said they are more likely to shop online with a retailer if the returns process is simple and hassle-free. 29% of shoppers said they would be more likely to buy from an eCommerce store if they received an instant refund when returning items, and a significant 37% of shoppers said they’d be more likely to use an online store if it offered a completely free returns policy.

Here are some more eye-catching stats which make a convincing case that eCommerce stores should be focusing on making their returns policy as convenient and as hassle-free as possible:

  • Over two-thirds of shoppers say free returns are an essential factor in their choice of retailer.
  • A frankly enormous 78% of shoppers say that if a retailer offers free returns, they will buy more from them over time.
  • 62% of shoppers say they actively avoid retailers that don’t offer free returns.
  • A huge 84% of shoppers will not return to a retailer if they have a bad returns experience.

Aside from building brand loyalty, a good returns process can also become a revenue-generating channel – not merely in the indirect sense of increased repeat purchases from happy customers, but directly in the form of reCommerce.

The case is clear. You need to offer your customers an excellent returns experience, and you need to offer it fast. If you don’t, you’ll be damaging your brand in the eyes of today’s empowered consumers.

Measuring customer retention

It’s a well-worn piece of business advice, but it really is cheaper to retain customers than acquire new ones. A high-quality returns experience is a key element in retaining customers. But, before you start investing in improving your returns policy, you should first ensure that you’re actually able to measure your customer retention rate.

Establishing a baseline will then enable you to measure the effectiveness of any changes to your returns process.

The customer retention formula

Calculating your customer retention rate is fairly straightforward and requires you to have access to business data that should be easily available.

To figure out your customer retention rate, do the following:

  • Work out how many customers you have at the start of a specific period (this period could be your financial year or the calendar year. The period you choose may be determined by the particular vertical in which you operate). Let’s call this A.
  • The next step is to find out how many customers you have acquired throughout the duration of that period (e.g. the end of the financial or calendar year). We’ll call this B.
  • You then calculate how many customers you have at the end of this period. We’ll call this C.

You then use the following formula to calculate your customer retention rate:

((C – B) / A) x 100 = your customer retention rate (as a percentage)

With a system in place, you can then effectively measure the impact of any improvements to your returns process (as well as any other customer-facing business improvements).

Ways to Improve your returns experience to build customer loyalty

Improving your returns experience goes far beyond offering free returns (although that is a key part). There are multiple changes that you can make that’ll create a following of happy, loyal customers. We’ve outlined the key things you can do to improve your returns experience below.

Communicate, communicate, communicate

How many times have you tried to return something only to find your enquiry (or returned item) disappearing into a void? It’s something that positively infuriates customers, and is one of the reasons why eCommerce giants like Amazon do so well – they communicate, communicate, communicate.

Whether it’s providing regular email notifications on the progress of a customer’s return, or providing live tracking via an app, any and all forms of communication will help to improve your returns experience.

The key point is to communicate with customers before they have to contact you. By the time they’ve picked up the phone to find out what’s happened with their return, you’ve already damaged your brand along with the likelihood of any repeat purchases from that customer.

Make your returns policy clear, simple to understand and accessible

If someone has the slightest doubt that they might not be able to return a purchase, then it’s unlikely they’ll hit ‘buy’ in the first place.

One widely shared statistic states that 42% of shoppers find it difficult to find return information when they are shopping online. Whilst 56% of shoppers have abandoned their cart when they’ve found the returns policy, not to their liking. A large majority of shoppers (estimated to be as many as 80%) will check a company’s return policy before making a purchase.

So, place your returns policy in a visible position on your website and ensure that it’s easy to understand and not filled with jargon or legalese.

Be clear about the terms of your returns policy

The word ‘returns’ is one of those things that people assume has a universal meaning, but it doesn’t. One person’s returnable item is another’s garbage. So, be very clear with the terms of your returns policy.

Set out clearly what you will and won’t accept as a return. You may want to provide the following information:

  • What you consider to be acceptable returns – You should out what items you’ll accept as a return and which you won’t. Ensure you are very clear about what items are exempt from your returns policy – it’ll save you and your customer headaches further down the line.
  • Return period – Ideally you don’t want to be refunding items that were purchased 6 months ago (it would cause havoc for your cash flow and inventory at a minimum!). So, set out clearly the time period during which a customer can return an item following purchase. You’ll most commonly see 14 or 28 days as returns periods for many retailers.
  • Condition – In what condition are you happy to accept returns? Do the items need to be in the original packaging? Do the sales tags need to be intact? You should decide what level of condition items should be in to be accepted as a return and make this very clear in your returns policy. If you are worried about what to do with returned items, you should investigate what type of inventory liquidation strategy is right for your brand.
  • Type of refund on offer – Some people will automatically assume that a return means they get their cashback. Others accept that they will get a voucher as a refund. What’s essential for you, is setting out the types of refund you are willing to offer.

Offer flexible returns options

Thanks to fast-fashion retailers such as Asos, Boohoo and Pretty Little Thing, consumers have come to expect flexible returns policies that work around them and their lives rather than vice versa. Nobody likes having to wait at home for an entire morning (or day!) just to hand a return to a courier.

Different people want to return their items in different ways. In the UK around 50% of customers like to return items via the post, whilst a slightly smaller percentage would rather drop their returns off at a physical location (such as a drop-off point, mail locker or brick and mortar store).

As we mentioned earlier, consumers are also increasingly expecting free returns to be a ‘given’. Again, thanks to companies such as Amazon, free returns have been normalised. Whilst you may think you’re saving money by charging for returns, you’ll likely lose more in lost sales than you’d have to spend to provide free returns.

Work with a dedicated returns partner

The most effective thing you can do to improve your returns experience and build customer loyalty is to work with a dedicated returns partner such as ClearCycle. We take the pain out of returns with our data-driven stock liquidation and re-commerce solution to provide the best yield for returns.

Our approach to managing returns is completely tailored to each client, so you’ll benefit from a solution that is optimised for your needs. Plus, our approach can be adjusted and enhanced at any point to suit your changing priorities. We can help you operate smarter in the way you receive, resell, recycle or dispose of items returned by customers.

So, take the headache out of returns and find out more about ClearCycle’s solution.

Are returns and overstock impacting your business? If you are ready to join the reCommerce revolution with a sustainable selling solution, contact ClearCycle now.


Find out more about reCommerce and how it can benefit your business on the ClearCycle news and insights hub… 

A Guide to Reverse Logistics and How it Works | Inventory Liquidation Strategies Every Brand Should Know | How to Improve the Product Returns Strategy for Your Brand

Dan Hague ClearCycle

Dan Hague

21 June 2021

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