Analyst insight: Buying behaviors are rapidly changing due to advances in technology, with a greater number of online purchases each year. So, too, is customers’ returns behavior. Younger, tech-savvy generations are using smartphones, tablets, computers and a host of other internet-enabled devices to make purchases with great ease. Yet they’re disappointed to find that returns aren’t as hassle-free. In a study by Narvar, 13% of shoppers said they wouldn’t shop with a retailer again after a negative returns experience.

As the rate of online shopping increases, retailers face the challenge of coping with a commensurate rise in the rate of returns. This is especially true for those who sell products that customers want to touch, feel and try on for size. About 10% of merchandise sold in the U.S. in 2018 was returned. Returns grew from $171.4 billion in 2007 to $369 billion in 2018, according to data from the National Retail Federation and Appriss. Disruptors like Amazon and other digitally native brands are forcing other retailers to offer costly, customer-centric policies such as free returns to remain competitive.

Most retailers view returns as a necessary evil, or simply as a cost of doing business. As a result, this portion of the business often suffers from a lack of focus and investment. Many retailers lack the streamlined processes, reporting tools and tracking systems needed to effectively handle returns, let alone turn them to their advantage.

Today’s shopper wants:

• Convenient return options, such as free shipping, in-store, and third-party return options.
• Clear and frequent communication throughout the process, including clear returns-process information before a purchase is even made.
• Quick processing of the return and any refunds.

Excelling at returns is a differentiator. Making returns a frictionless and pain-free experience is a real opportunity to protect and gain market share. For those retailers looking to make a positive impact on their returns, here are some things to consider:

Know your costs and margins. Not all returns are created equal. It doesn’t make sense to process a return if there isn’t enough margin to cover the cost of the work. Knowing what your true costs and margins are enables smarter decision-making and an improved bottom line.

Review your returns policy, and update it if necessary. Leading companies align their returns policies to incentivize the lowest-cost return option, or de-incentivize returns for consumers who are on the fence about whether to keep an item. Encouraging in-store returns wherever possible has the added advantage of providing another sales opportunity.

Track and manage returns as closely as you do for the rest of your inventory. Investing in processes, systems, reporting and metrics to track and manage returns can pay big dividends. The goal should be to process each return as quickly and accurately as possible, so that you have the best shot at reselling that product to someone else. By implementing metrics that measure returns cycle time, quality and cost, retailers can gain control of this aspect of their inventory.

Mitigate the need for returns. Advances in technology and better data enable new ways to help customers order the right products in the right size the first time. Review fit guides to ensure that they’re accurate, and provide product details and reviews. All are ways of helping the customer to make better purchasing decisions, and minimize returns.

Outlook

Online shopping is projected to continue rising in volume in the years ahead. As a result, retailers can expect to see a corresponding increase in the volume of returns. Companies that focus on optimizing their returns systems and processes will delight their customers and win new ones. Those that don’t will be forced to watch their sales and profitability drop, as customers take their business to competitors where the overall shopping experience is more convenient.

Rob Dold is senior account executive at Fortna.