Returns: a necessary evil.
Recently, Shiptimize has become a partner of eCommerceWiki, one of the leading knowledge-sharing communities on eCommerce related topics.
This partnership is aimed at the development of specialized content, focusing on shipping, for the digital community that gathers around this important eCommerce Foundation initiative.
In Shiptimize’s first contribution, our Marketing Manager Melissa wrote about reverse logistics and how this is both feared, as well as necessary for online stores.
Check out the article below.
There are many things that are best to avoid when it comes to selling products online: bad reviews, delays on deliveries, clients asking for a product that just ran out of stock, a website crash… That is just to name a few. And all these unfortunate events have one thing in common: they can become very costly to an eCommerce business. But what happens when the thing you want to avoid is also something consumers judge to be increasingly necessary?
According to a Barclaycard research, 30% of shoppers deliberately over-purchase and, subsequently, return unwanted items – and 31% of online retailers claim that managing the returns process has an impact on their profit margin. And that was back in 2016. Now, with the growth of the “try-before-you-buy” trend it’s no wonder that, according to ReadyCloud, 81% of shoppers want a simple, fast and easy return. The cost of that? According to Statista, it could reach $550 billion by 2020 in the United States alone.
But not offering returns at all also has a high cost: the impact on a store’s conversion rate. Free returns or exchanges is the number two reason for consumers to become more likely to shop online, according to Walker Sands. The ease of online returns also appears in the survey, with 36% of respondents seeing that as one of the main reasons to purchase as well.
Free returns as a marketing tool
The truth is, when it comes to shipping – and returns – we cannot ignore the marketing value that the “free” concept has. According to ReadyCloud, 79% of shoppers want free return shipping. That kind of offer is perceived as a sign that the store fully trusts its products. It is also known to help build customer loyalty, as clients feel as they can rely on that brand.
For some companies that is such an important statement that it’s worth getting products back for free only to dismiss them, as sending them back to the store would be more expensive than the product itself or than trying to resell it.
But can all online stores afford free returns?
There is more than “free” to the returns process.
By now we established two conflicting truths:
- Consumers want easy returns;
- Returns can be very costly to an eCommerce.
Still, not offering it can have a deep impact in the conversion rate, which can be just as harmful to the business. But there are alternatives, as offering free returns is not the only possible way to go.
Depending on the type of product the store sells, it is possible to have returns paid partially or fully by the customer. In the first case, the store needs to calculate the average price of returns and then decide the percentage of margins that is possible to allocate to returns costs. Finally, in the last case, the customer will be full responsible for the cost of the return, which will vary depending on the chosen carrier. But the store still needs to provide the return label, so that the client can print it.
How to best approach returns on each case
It is important to remember that dealing with the returns flow of an online store goes beyond than just figuring it out who will pay for it. It is still necessary to decide if the store will send the return label with the package or if it will only send it upon request. And, in that case, people in charge of customer services must be prepared to handle those requests.
Deciding on all those different variables will greatly depend on the type of products the store sells and who their clients are. For example: a fashion eCommerce has a far greater chance to have a constant returns flow than another one that sells big, expensive items, like flat screen TV’s.
So, in order for a store to put together a return policy that will satisfy the customer, whilst also being economically feasible for the seller, some math is needed. And it needs to take into consideration the probability of the product being send back, the cost of those returns and how different returns policy may affect the conversion rate of the store.
It is even possible to get to the conclusion that different products from the same store should have different return policies. Maybe you will offer free returns on your regular fashion items, but ask for the client to contribute with the costs when those items are sold on a special season sale, as profit margins are already lower in that case.
The truth is, there are easier ways out, such as sending the shipping label with the product for a free return – which comes at a price. And there are other solutions that require adding a few more steps to the process, but that will also potentially have less impact on your margins. Finding that balance will depend on each case. And, at many times, finding the right one will be a simple matter of running small, fast tests to see the overall results on the store’s process and margins.
Since this article was written to eCommerce Wiki, I invite you to finish reading the original article here.