Adam Bernstein discusses the minefield-filled world of internet returns, and how to avoid the risks of returning purchases.
Like it or not, the world of retail has changed as traditional bricks and mortar stores have had to compete with online in ways never envisaged a few years ago. With rising costs and overheads such as business rates, retailers have to play the online game to survive. But selling online can add much to a business – new customers, greater reach, and to an extent, ‘free’ advertising if social media is deployed properly. Hafod Hardware is a prime example; its 2019 Christmas video was shot for 100 and by mid-February 2020, had been seen more than 2.6 million times on YouTube.
Who is worst for returns?
But with online comes the risk of returns, which derive from a statutory right granted to consumers some years ago to cancel an order within 14 days of receipt. However, rights granted under law, as well as a retailer’s desire to offer great customer service, give consumers confidence in what they may be ordering.
That said, rights can be a curse for a retailer; at any one time a proportion of sales are at risk of being returned, there’s a loss on delivery charges which must be refunded, administration cost related to processing the returns, and of course, the question of what to do with returned and potentially opened items.
Data from US-based Redstag Fulfillment illustrates the problem. It suggests that returns could cost a firm anywhere between 20-65 percent of the cost of the goods. But while one estimate suggests that returns could cost UK retailers 5.6bn a year by 2023, spare a thought for German retailers. A 2018 University of Bamberg study found that Germans already return 5.5bn worth of goods a year, a number that will surely grow. So, what to do?
What can retailers do to staunch the flow whilst not alienating the market? To answer this question, it’s first helpful to consider the results of a December 2018 survey for Globalwebindex. It questioned consumers in both the US and UK about their shopping and return habits; the results were quite illuminating.
First off, the survey found that age had little bearing on the return rates with 72 percent of 25-34’s making a return compared to (just!) 42 percent of those aged 55-64. And of the sexes, it appears men are the big returners – 35 percent of men would return compared to just 16 percent of women. Interestingly, the survey found that “almost 80 percent of people in the US and the UK check the returns policy on a retailer’s website before making a purchase.” In other words, the concept of return is uppermost in a consumer’s mind before making a purchase.
Another fact to emerge from the survey is that online returns are more likely when compared to purchases made in a physical store. This is partly a result of the Amazon Prime effect where delivery is free, and returns are made easy. Further, for some, it’s less embarrassing to return items at a distance than to have to face a member of staff.
Why we return
There are a number of reasons why consumers return products. Some are legitimate, but others are close on illegal if not morally bankrupt. Take ‘wardrobing’, a process where consumers order clothing to wear once, without removing tags, and then return the item for a refund after use.
Electronics and tools see the same abuse. But other reasons recorded include faulty products on arrival, incorrect sizing or fi t, product expectations not met, the wrong item shipped, an appearance difference from the advert, multiple sizes added to the order to get one correct item, impulse purchases, and purchases made to achieve free shipping.
It’s of note that, according to Readycloud.com, an online shipping and marketing platform, 65 percent of returns follow on from a retailer’s actions – especially those related to consumer expectations and sizing. But these should be easy to fi x with detailed and accurate descriptions of the product, design, sizing, colour, materials, specifications and so on. Quality imagery from different angles that allows consumers to determine what they’re considering combined with regular and reliable sizing should also help. After all, if a customer always knows that a medium will fit them, they’ll have no need to order multiple sizes and that’s bound to help retailer inventory.
Where appropriate, product videos may help consumers gain further insight. This approach works well with technical items including equipment and electronic devices. Allied to this is an option for consumers to review purchases with pointers for others on
sizing accuracy. Another option is to allow in-store collection when possible. This serves two purposes. Firstly, it cuts out the shipping cost and risk of products being damaged or going missing in transit. Secondly, it gives consumers the chance to examine an item before completing the purchase which should reduce the need to return items as alternatives may be found while in store.
It follows that retailers with their finger on the pulse of their business should be checking if certain products are being returned in greater numbers than others; a rise could indicate a problem with a particular product or the way it’s been promoted that misleads consumers. But returns don’t necessarily have to be negative. Some firms such as Next don’t permit online goods to be returned back to a store, but others such as John Lewis do. And this can be beneficial as letting consumers return to the store may lead to them buying another product on their way to or from the returns desk.
Returns are all part of the sales process and if managed correctly, can boost the reputation of the retailer in the mind of the customer. To drive the point home, consider how Amazon has conquered the online world. The sales process is very slick, but so is the returns process. Sure, some can abuse their statutory right to return, but overall, they keep buying from Amazon because they can trust the process.
Creating a returns policy
Be upfront - Every retailer, like it or not, needs a returns policy and it should be published openly so that it’s easy for the consumer to understand their position. A good returns policy should give consumers peace of mind. To reiterate, almost 80 percent check the returns policy before making a purchase; retailers shouldn’t give consumers a reason to shun a site. Cover shipping costs - Nothing in life is ever truly free, but nevertheless, we like to think that it is. The problem with the web is that it’s made pricing very transparent in that comparisons between firms are easily made. However, having low cost structures, buying in bulk and bundling products can help with revenue and add competitiveness which may permit both free shipping and online returns too.
Granted the study is a little old now, but a 2012 paper from Washington and Lee University found that free returns can have a major impact on future sales. The research from two surveys, over 49 months, demonstrated that when consumers received free shipping on returned items, their purchases over the next two years increased by between 58 percent and 357 percent. In contrast, when consumers had to pay for return shipping, their subsequent purchases decreased by between 74 percent and 100 percent.
Give options - We live in a world of convenience and it’s orientated around the consumer, not the retailer. This makes it ever so important for a retailer to offer consumers options when making returns. In store, Royal Mail, Collect+, MyHermes, DHL - offer the fl exibility that consumers demand; retailers that make it hard for a return to be made may never see that consumer again.
For some the instore option is preferred as it’s easier to head to town than having to find tape to package items up. It’s also instant, with no wait for a refund or worry about items lost in the post. It also allows the potential for a ‘replacement’ sale while reducing a retailer’s own returns-related costs. Others will still prefer to post the item back so a pre-printed returns label helps as it’ll be correctly addressed and legible.
The refund - It stings to make a refund but there’s no point dallying. From the consumer’s perspective it’s a huge irritant that retailers seem quick to take payment, but slow to make refunds. Again, retailers that are slow may lose future custom.
Remember Christmas - A combination of Black Friday and Christmas makes for perilous times in retail as consumers often buy gifts ahead of the holiday season. Most will be bought with the genuine intention of the item being kept, but of course, some may be returned when subsequently found unsuitable. By definition, the legal right to return doesn’t work at this time and so retailers should extend the returns period if they want to win custom. Of course, this creates its own problems in that stock could potentially be returned. It’s a fact that consumers have rights which they are well aware of. This doesn’t make it easy for retailers, but risks can be managed. If the right policy is put in place, a returns policy can become a great asset.