Comment: Turning returns into a competitive advantage

It is well understood that returns are a fact of online retail life and not only is it now mandatory to give shoppers 14 days to make returns, it’s now recognised as good practice to do so.

However – for most e-tailers, returns are a problem; a ‘failed’ sale and a bottom-line cost that does not encourage them to invest any more than absolutely necessary in dealing with the associated logistics.

And it shows, according to IMRG's Blackbay Consumer Home Delivery Survey 2015, only 61% of shoppers are satisfied with the returns service they experience.

To date, most of the focus around returns has understandably been how to reduce the need for the customer to send an order, or more likely, part of an order back. More accurate sizing information and product descriptions and ever better (360 degree) imaging can help the customer make the right choice, but no matter how good retailers become at presenting the product, some will always come back.

And it’s going to become even more of an issue as UK retailers increasingly trade cross-border, as other markets present a much tougher returns landscape. German consumers, for example, have high expectations in this area and return rates are relatively high compared with other markets, potentially reaching 40%. IMRG researched the country in its eCommerce Worldwide German Passport, and we discovered almost three quarters of shoppers in the region are reported to regularly return goods and over a third have made online orders knowing that they are likely to return them.

Outside the EU cross-border returns introduce another problem – duty draw-back – with the vast majority of retailers not even bothering to reclaim the duty they have paid when the exported order comes back unsold.

It is therefore time for retailers to look at the way in which they manage returns and turn them into a source of competitive advantage rather than a problem and a cost.

The starting point is how the retailer asks the customer to ‘report’ the return – most don’t, they simply put a returns form in the outbound parcel with a generic label. With this system they have little control over the returning item and they don’t even know what it is until it arrives back in their returns centre.

Forward thinking retailers are now asking the customer to do a little bit more and use an RMA (Returns Merchandise Authority) process. This simply asks the customer to go to a returns page / portal and advise exactly the item they want to return and the reason why. Behind the scenes the retailer can apply appropriate business rules to handle the return in the optimum way:

Once the return has been logged and the appropriate instructions given, the return needs to come back via a tracked service so the retailer has very early visibility and can plan accordingly. A return only becomes ‘live’ once it has started its journey home. If the retailer gets live status updates it is possible to plan for the returning item as inventory for resale, a repair that needs to be made or for disposal through another channel.

It is also possible to manage the customer’s expectations and keep them informed about the progress of their refund. Remember, at this stage the customer is out of pocket and has no goods to show for it – this makes for an anxious shopper who is not likely to be a repeat one.

So if returns are pre-advised and the logistics transparent, online returns can be handled cost-effectively and can be a great driver of customer loyalty – and this is the payback. Doing returns right can save acquisition costs so it might be worthwhile considering moving some marketing budget to invest in an RMA / returns portal approach.