The cost of returns: How businesses can minimize losses

The cost of returns: How businesses can minimize losses

Despite being an essential part of the online shopping world, returns come at an extra cost that no business enjoys. Read on to learn how to give your customers a 5-star returns experience without overpaying on return fees.

For online retailers, a good return experience is almost as important as the purchasing experience. In fact, 90% of US shoppers say that a convenient returns policy is one of the things they care about most when deciding where to make a purchase.

Clearly, every customer wants returns to be easy - and you want to offer them the best return experience possible. But there’s no denying, returns can come at a cost to your business. Based on findings from a recent NRF survey, for every $1 billion in sales, the average retailer faces returns totaling a whopping $145 million.

But while returns can be a nuisance, there are plenty of smart strategies you can use to minimize the impact of returns on your bottom line. Here are some practical solutions for handling returns, while still keeping your customers happy:

1. Implement a customer-friendly return policy

Supplying customers with a clear, flexible return policy is one of the easiest ways to help improve customer satisfaction and reduce the likelihood of returns. In fact, one study carried out by Invesp, found that a staggering 92% of customers will purchase from an ecommerce store if the return policy is straightforward and easy to follow. By clearly stating the conditions for returns and exchanges, you can minimize the number of frivolous returns and manage the ones that do happen better.

Giving customers a longer return deadline can help supply customers with a positive experience despite needing to make a return. The average return policy for major retailers is between 14 and 30 days, but some major retailers - such as Target - give customers even more time to send their items back. 

These more generous policies may grant customers up to 90 days or even an entire year to return items, provided they have a valid receipt. By offering longer return windows, you can increase customer satisfaction, give shoppers confidence that your products are great, and set yourself apart from your competitors. 

Just remember, it’s important to clearly communicate this return window to the customer before they make their purchase. Creating customer loyalty for the win!

2. Provide flexible options for returning

Understanding that a one-size-fits-all approach isn't effective for returns enables you to embrace multiple return options. Customers appreciate having choices and the ability to select the return method that best suits their preferences and circumstances. 

By catering to diverse needs and preferences, you can create a more positive and personalized experience for your customers, ultimately strengthening customer relationships and driving repeat business. 

Providing choices such as at-home pickups, in-store drop-offs, curbside returns, and partnerships with retailers for returns - for example, Amazon's collaboration with Kohl's - massively enhances the overall customer journey.

According to Narvar, approximately 25% of shoppers are willing to pay for a convenient returns experience - and the #1 requested convenience? A scheduled home pickup option. 

At ReturnQueen, we recognize the importance of offering hassle-free return solutions that prioritize customer convenience and satisfaction. Our seamless at-home pickup service is designed to eliminate the need for customers to box up their returns, tape them shut, or drive around to drop off packages. 

The ReturnQueen app allows customers to experience effortless returns, ensuring a positive shopping experience for customers. After all, an increased customer satisfaction rate means more returning customers!

3. Optimize the customer’s shopping experience

Optimizing your website for customers needs is essential for customer satisfaction and reducing return rates. 

What do we mean by that? Well, for starters, a clear, well-organized product page serves as a good foundation for a seamless shopping journey. By showcasing each product on your website accurately, you allow customers to make informed decisions when purchasing - and therefore minimize the likelihood of returns. 

Here are some ways you can start optimizing your product pages to offer a better user experience:

    • Providing detailed sizing charts, comprehensive descriptions, and high-quality photos and videos can help give the customer a full view of the product. 
    • Sizing charts help customers choose the fit that’s right for them.
    • Detailed descriptions offer valuable information about the product's features, materials, and specifications. 
    • If you're selling clothing or accessories, it’s also useful to let customers know if the items run true to size or not. This enables them to make more accurate decisions about sizing before trying the item on, preventing the need for exchanges or returns.
    • Another powerful way to increase customers’ shopping experience is showcasing ratings and reviews from verified purchaser’s can also help build customer confidence in purchasing. Power Reviews finds that 66% of shoppers claim they are less likely to make a return when they are able to read ratings and reviews before purchasing. Bonus points for allowing customers to upload their own images or videos when writing a review! 

4. Outsource returns management

Outsourcing return processes to third-party logistics companies allows you to offload many of the labor-intensive parts of handling returns, such as accepting, sorting, and restocking items. Offloading these tasks frees up internal resources to focus on other business activities.

Third-party logistics (3PL) providers often have optimized systems and technology in place to better handle the return process. They can efficiently manage returns on a large scale, leveraging economies of scale to reduce costs and improve efficiency. 

For example, third parties may use advanced systems to track items, automate the sorting process, and find opportunities for item consolidation and bulk shipping. Bulk shipping can save on shipping costs through reduced transportation costs and improved inventory management. This also helps minimize packaging materials and transportation emissions, reducing the environmental impact of your returns.

One great example of a 3PL is Amazon. Sellers use Amazon’s Fulfillment by Amazon to not only get their products to customers, but also for return management. Amazon is then responsible for receiving the return and determining whether the items are suitable for resale. Depending on the condition, Amazon may restock the items or dispose of them. 

While it seems using a 3PL to handle your return process is a big change, the long-term benefits often far outweigh the initial investment.

5. Automate the process

If your customers are having to reach out to customer service to make a return, you have a golden opportunity to save some real time and money. Implementing a self-service returns portal that allows customers to initiate a return or exchange without having to contact your customer support team is an easy step you can take to make the process more efficient and bring your costs down. 

Providing customers with updates on their return is also a great way to build customer trust. 

On top of that, you can leverage the data collected through the returns portal to gain insights into return patterns, reasons for returns, and areas for improvement in product quality or description. This information is extremely valuable for customers’ decision-making and helps optimize the returns process to better meet customer needs and expectations over time.

You can have the best of both worlds!

As you can see, there are many strategies available to reduce the impact returns have on your business’s wallet - while giving your customers a five-star returns experience. By incorporating these practical solutions, you can effectively manage returns while keeping customers happy and loyal to your brand. 

Cheers to less returns and more profit!