Contributed by Peter Sobotta, CEO of ReturnLogic
With over nearly one-third of all online orders being returned, it is no wonder more and more Shopify retailers are seeking ways to slow the bleeding. The simple act of processing a return can leave your business deep in the red.
According to a CNBC report, the average return costs retailers 30 percent of the purchase price. If your margin isn’t greater than that, you’re actually losing money on each return due to the cost of shipping labels, the labor associated with customer service coordinating the return, and your warehouse processing and restocking the items.
Combine those costs with additional problems like damages that cannot be restocked, or out of stock items that make no sense to put back in your store, and you’ll begin to understand just how expensive this is whole process is.
What’s more frightening is that many e-commerce stores aren’t considering these factors when calculating their CLV (customer lifetime value), which results in a gross misrepresentation of a business’s health, especially considering your best customers are likely the ones making the bulk of your returns.
Fear not. Return rates can be manageable and with a little guidance you can shrink yours down far below that 30 percent average. One way to do this is to simplify the returns processing for your customer service and warehouse teams while supplying intelligent, actionable analytics for your management team using a tool like ReturnLogic.
Here are six ways you can optimize your return rates and make your business cost center into a profit center:
1. Track everything
Collecting return data, specifically return reasons, could mean the difference between two returns on a single SKU versus twenty. How? Right now, most businesses don’t have an efficient method of tracking why an item comes back. A mishmash of wrinkled paper forms and off-hand comments made to customer service agents over the phone are all most stores have in terms of returns data.
Having a centralized way of storing your customers return information can make all the difference in identifying frequently returned items.
What if one of your popular items has a manufacturer defect like a missing button or broken zipper? It could take months for someone to notice the increase in returns on that single item (or perhaps it’s only a single size variant that has the issue). Identifying these trends early enables you to fix the manufacturing problem early without leaving additional customers disappointed.
2. Make returns more liberal
The only difference between a 30-day and 90-day return policy is your own comfort level. According to a University of Texas-Dallas study, lenient return policies were shown to increase order volume more than they increased returns volume.
Considering that 67 percent of shoppers check a return policy before making an online purchase, it’s fair to say that offering leniency up-front will help them feel more secure in their purchase decision. No one wants to buy something they’ll be stuck with, especially in the fashion and apparel industry where sizing can vary so dramatically.
3. Stop putting return labels in the box
A surefire way to inflate your return rate is by giving your customers unfettered access to easy returns. Yes, a lenient return policy should be available for your customers, but that doesn’t mean you should make it easy to return. Don’t include the return label with every order - that can actually encourage returns. Make customers take the extra step of logging into your site to download a returns label if needed.
4. Consider loyalty
Customer satisfaction is a top priority for most ecommerce stores. Happy customers = repeat business, right? A study from UNC at Chapel Hill and Georgia State University found that “a satisfactory product return experience can lead to increases in customers’ future purchases and referrals and in the profit they yield for the company.”
Even your best customers are going to make returns and exchanges, so providing a seamless, user-friendly process for doing so makes total sense. ReturnLogic provides a self-service returns and exchange portal that does exactly this.
5. Be realistic
Shopping online, especially for fashion and apparel, can be a frustrating experience when product photos are lacking details. Unlike shopping at a brick and mortar store, the customer doesn't have the opportunity to feel the fabric, see it’s true colors, or try it on for fit. Product photography is needed to supplement these experiences to ensure the customer is buying something they're going to keep. Ineffective or dishonest product shots increase your return rate and cripple your CLV.
Be honest with your customers and continue building trust for future purchases. Do your catalog shots accurately depict how your product fits on a real person? Binder clips and double-sided tape are cheap. Returns are expensive. Your product needs to be portrayed in a realistic manner to keep the customer from feeling deceived.
6. Keep learning from your mistakes
You’re probably not going to nail your returns program on day one (or even on day 10,000), but continuing to adapt and pivot your strategy just as you do with the rest of your business is key. Whether you’re testing your return policy length, re-examining your size chart measurements, or making your return policy more prominent, there are dozens of tiny ways that you can influence returns.
Interested in taking total control of your Shopify returns? Visit ReturnLogic.com to schedule a free demo with a returns expert.