July 18, 2023
Did you know that for online purchases the starts on returns are x4 bigger than for offline shopping? On average, around 30% of products purchased online are returned, while for offline this parameter equals 8% only. The good news is there are way to make this number lower. Using advanced technology and a little out-of-the box thinking.
Every eCommerce business, every online retailer wants their items to be sold. But not returned. However, this world is far from perfect. In the UK 15% of customers says that they return online purchases most of the time, while 8% claims they do it all of the time.
And UK is not even the worst country in this respect. According to Statista, in 2018 “return leaders” were German and Dutch shoppers.
However, in the age of cross-border trade it doesn’t really make any difference. Many eCommerce businesses sell all across Europe, and returns become bigger and bigger headache for them .
And we all know why.
A high rate of returns can make the difference between a profitable e-commerce channel and a financially burdensome one.
Hence, effective management of e-commerce returns is essential for the success of many retailers. This involves two primary considerations:
1. Minimizing returns of e-commerce products
2. Implementing efficient strategies for handling e-commerce returns
Let’s see what the most efficient retailers do to address these issues.
But first, let’s start with the distinction of the return process in omnichannel retail and ecommerce.
eComm returns refer to product returns that happen through an online e-commerce channel. What makes them unique in comparison to omnichannel and offline retail is the process of reverse logistics.
In omnichannel and offline retail, shoppers may simply bring their product back to the store where they bought it from – where it can be inspected, repackaged, and in many cases, put back on the shelves. If the product looks damaged or used it might be not admitted. This is not the case with digital trade.
In a strictly e-commerce environment, the customer must first request to return a product online, then follow a series of steps that might include:
· Filling out a form
· Downloading a shipping label
· Printing the label
· Packaging the product up
· Shipping it to the specified location
Depending on the complexity of the seller’s fulfilment and distribution, the product may need to be moved several times in order to inspect, repackage it, and re-stock it as a sellable item.
This entire processes called “reverse logistics,” and creates a heavy burden on the ecommerce bottom-line, not to mention the level of customer satisfaction with the whole buying experience.
Challenges in e-commerce returns can have various impacts and consequences:
· Customer dissatisfaction: A poorly executed returns process can lead to customer frustration, negatively affecting their overall shopping experience. This dissatisfaction may result in the loss of valuable customers.
· Increased costs: Handling returns requires additional time and resources, including processing refunds or exchanges and restocking returned items. These added costs can strain finances and impact the profitability of e-commerce businesses.
· Damage to brand reputation: Inadequate management of returns processes can harm a brand's reputation. Unsatisfied customers may share their negative experiences through online reviews, deterring potential new customers from engaging with the brand.
· Inventory management issues: Inefficient returns handling can lead to inaccuracies in inventory levels and tracking stock. This can result in challenges such as over selling or stock shortages, disrupting the smooth operation of thee-commerce business.
· Lost sales opportunities: Ineffective returns processes can impede the chances of reselling returned items. Over time, returned products may become damaged, outdated, or lose value, reducing the potential for recovering revenue from those items.
· Environmental impact: E-commerce returns contribute to an increased environmental footprint. The transportation, packaging, and disposal of returned items consume additional resources, further exacerbating the environmental impact.
Unfortunately, sellers who suffer the most from all these issues are apparel and fashion eCommerce businesses. Only in 2022 UK shoppers end up returning 34% of clothing items they buy online. Then it will come as no surprise that fashion retailers are the ones that try to leverage all available tools and methods to reduce returns rates.
Here are some most popular steps Apparel &fashion retailers take to manage the e-commerce returns process:
Regularly analysing returns data enables you to identify areas for improvement and reduce overall return rates.AI-driven analytics can be particularly valuable for processing returns data efficiently and uncovering meaningful insights.
The first crucial step is to ensure that your data isn't siloed. It's necessary to connect all data points, including product, customer, basket size, return instances, return period, and more. Many companies make a significant error by losing some of this data, preventing them from conducting comprehensive, efficient analyses and achieving statistically significant results.
The human eye is not the most reliable tool for recognizing patterns. Traditional Excel spreadsheets can be useful, but they become inadequate when dealing with a product catalogue of more than 100 items. In this case, what you need is AI-powered data analysis. This can help you detect patterns, exclude outliers, identify common reasons for returns, pinpoint the customer type most likely to make a return, observe high return rates in specific product categories, and discern seasonal trends. These insights can help optimize your inventory management and marketing efforts.
Utilizing AI-driven predictive analytics solutions, like Aimondo Predictive Analytics, is more efficient than attempting manual forecasting or even hiring an entire team of data analysts. An advanced tool like Aimondo can assist you in predicting not only demand and optimizing prices but also in drawing other types of predictions. These include the likelihood of returns for a certain product, category, location, sales channel, or customer type. Using this data, you can make strategic decisions on what to sell, where to sell, and which types of customers to prioritize with personalized offers.
As an eCommerce manager, you might be tempted to make customers jump through more loops to discourage them from returns. Don’t do that.
In February 2018, L.L. Bean, an outdoor clothing retailer from Maine, USA, changed its return policy, to only allow returns within several weeks of purchase and made customers fill in long forms to request a return. The policy change was met with significant backlash from many customers, who had chosen to shop at L.L. Bean in part because of their customer-friendly return policy. This move ended up damaging L.L. Bean's brand image and customer loyalty, with some customers even filing lawsuits against the company for the change. L.L. Bean had hoped that the policy, but the negative impact on customer loyalty and overall sales was already made.
Instead of making customer’s life harder leverage AI-powered predictive analytics tools like Aimondo to test and validate hypothetical scenarios of returns: what will be the impact on your profitability if returns get to level X? What will happen if you manage to reduce returns to level Y? What will be the cost of implementing additional measures that will simplify your returns? Will these costs cover the potential benefits?
Regularly evaluate and refine your returns process to deliver an exceptional customer experience. Monitor customer feedback and stay informed about industry best practices to ensure your returns process remains customer-friendly and up-to-date.
By following these steps, you can effectively manage e-commerce returns. If you're interested in best practices download our eBook on Reducing returns best practices: 5 real-life examples of reducing returns up to 20%.
Step-by-step guide on maintaining high profitability in retail.