The first day back to work after the Christmas and New Year break is when most people have something unwanted to send back. But returns are a year-round problem for the retail sector – multichannel retailing adds complexity, and occasionally confusion, into the mix for some retailers, and that equals cost.
If you can’t turn returns round quickly enough stock becomes old stock and margin becomes lost margin. Added to which, if you handle returns badly you can seriously damage a customer relationship, and that can be very costly over the long term. Slick, customer-friendly returns processes can be thought of as high-cost exercises, but there’s much more to it than that. The commoditisation of the front-end of retail (product and price are broadly similar, for example) means customers are increasingly evaluating retailers on operational execution – delivery and returns being chief among them.
This is the new front line, or one of them at least. Get it right here and you can repair a damaged customer relationship just as easily as you might otherwise have lost it for good.
Headquartered in Boras, not far from Gothenburg on the west coast of Sweden, Centiro specialises in designing logistics management software with people in mind. It’s CEO and chief architect, Niklas Hedin says he’s not convinced retailers are still making enough effort where returns are concerned, and that they are still where they were 12 months ago in terms of preparedness and ability to cope.
“There are two groups of retailer. Those with a smooth returns process (from the customer’s point of view) and those who do not,” he says.
Returns are a part of the buying decision for a customer, Hedin says. Which is why retailers who aren’t regarding them as such are setting themselves up to struggle.
“Ideally you wouldn’t get any returns. But you will. So the process needs to be smooth, otherwise it can be a major cause of abandoned baskets.”
Of course, a less-than-ideal returns experience isn’t just bad news for the shopper who wants to send something back. Vicky Brock, CEO of Clear Returns, cautions that there are different types of returning shopper persona, and that if you get it wrong with some of them at the returns stage, they’ll never come back.
At one end of the online shopping spectrum, there are people who simply never return things; for reasons often known only to themselves they keep everything, including the faulty and ill-fitting. The next segment (which accounts for maybe 10%-20%) absolutely hate returns – more about them shortly. In the middle of it all is a group Brock identifies as ‘explorers’, who are quite relaxed about returns. After that there are over-buyers – bring the shop to me is their mantra – they shop at full price and tend to have the largest basket sizes.
“There are huge numbers of shoppers who don’t want to have to return things. For them it just means something went wrong. The lost lifetime relationship, even when the return is smooth, can be enormous,” Brock explains.
Identifying those especially sensitive to any difficulty in the returns process can keep a customer relationship upright and can even further enhance it.
First time customers who buy one item and then return it ought to be little red flags to the most alert retailers… what went wrong? Clearly average order values, operating margins and your own average lifetime customer value equations will play a part in this, but if you are catching each of those brand new customers who are returning 100% of their first order, why not make individual contact with them and see what you can find out about the reason they chose to buy from you and then why something went wrong? It might just be enough to turn a negative customer experience into a positive one.
“Operationally, anyone dealing with returns tends to focus on the package, not on the customer or even the product itself,” says Brock. It might be a box in a warehouse at some point during its life but once it’s been ordered by a customer it becomes a promise waiting to be kept, with everything that goes with it by way of expectation, risk, and reward.
Balancing the risk and reward is at the heart of retail, of course. But, as Hedin cautions, there’s a different set of costs involved when it comes to servicing an ecommerce business
“Lots of retailers are still focused on growth. But many are now starting to focus more on innovation and change.
“Unlike when things were purely stores based, you are constantly hurting your margins in order to keep your customer service levels high. You need to think about catching the return before the customer has even sent it back to you – capture the data and use it. Route returns to the best destination, not just the most obvious one.”
It can also be possible to spot returns at the point an order is placed. “We’re working on predicting returns, Brock explains. “If three dresses go out all different sizes, we know two will be coming back. We can route the return so the turnaround is faster. This is still rare though.”
Not everyone sells dresses, and not every shopper lays a trail of breadcrumbs that enable to spot an incoming return before the customer themselves has made their mind up. But everyone could do more to assess the value of a customer, and how much additional cost (spent on handling both a delivery and a return) can be judged to be an investment, not a write-off. The more complex the sector or category you operate in, the more complicated this is likely to feel. But by the same token the greater in number the likely points of inflection to introduce improvement will be.
A fuller version of this feature will be available in the next edition of eDelivery Magazine. You can subscribe here if you’re not already signed up to receive it.