February 6, 2015
Retailers fight for online customers’ hearts and minds on a variety of fronts —products, prices, shipping offers, messaging, website functionality and many others. One area that they’ve overlooked for far too long is the online returns process. Many retailers view returns as a necessary evil, at best, but to shoppers, returns policies are an important factor in their purchase decisions. One recent survey found that 66 percent of shoppers check a retailer’s returns policy before they place an order, while another one noted that those policies are the leading reason why people who shop only in stores refuse to make online purchases.
It’s not surprising that consumers worry about returns. Online shopping carries certain risks by nature, simply because would-be buyers can’t lay their hands onthe items they’re interested in, much less test them or try them on. The moment of truth for a purchase doesn’t arrive until the ordered item does, which usually occurs days after payment has been made. A lot of people don’t want to make that upfront commitment if they’re not certain their expectations will be met — and especially if they know they’ll have to pay to send the order back.
This helps explain why even the most successful online sellers, i.e., the Internet Retailer Top 500, convert prospects into buyers just 3.3 percent of the time, on average. As of January 2014, only 49 of the Top 500 — fewer than 10 percent —picked up the cost of return shipping for their customers. Another 29 said theywere considering doing so in 2014, but even if all 29 did, more than 80 percent of the Top 500 still make their customers pay the cost of returning an unwanted item.
Retailers do have valid concerns about the possible consequences of easy returns processes. Although the median return rate for Top 500 merchants was just threepercent in 2014, it can vary substantially by store, category, and season. For example, a jewelry and accessories store reported a rate of just 0.01 percent, but aclothing retailer saw 26 percent of its sales sent back. (Return rates in the apparelcategory often run as high as 20 to 30 percent.) Even worse, as prosperous as the holiday season is for retailers, returns also rise then; 35 percent of consumers returned at least one gift during that period in 2012.
Return rates aren’t retailers’ only concern, of course, much less their biggest. According to the National Retail Federation, merchants were cheated out of $10.9 billion as a result of return fraud in 2014. That figure doesn’t include the cost of cancelled sales or unsellable merchandise, which also take a toll on the bottom line.
All that said, retailers that focus solely on the potential pitfalls of customer-friendlyreturns are ignoring the real opportunities and tangible advantages that thosepolicies offer, particularly in the current eCommerce market:
- As noted earlier, consumers are notoriously cautious about placing online orders. However, a generous returns policy can help assure even your iffiest customers that their purchase risks are minimized.
If you don’t think you can afford to pay for return shipping, simply offering shoppers in-store returns can do wonders for their confidence. A comScore study found that 82 percent of online consumers say they’d complete a purchase if they know they can return it to a physical store or ship it back for free.
- More often than not, customers who want to return an item are disappointed with their purchases. An easy returns process can help soothe their frustrations, turn a potentially negative event into a positive one, and safeguard your relationship with them. It will also position you as a retailer that stands behind its products and values its customers — a reputation that inspires confidence and trust.
The results of that brand enhancement can really pay off. According to an Endicia survey, 95 percent of online shoppers will make additional purchases at retail sites where they’ve experienced easy returns. Just as importantly, 64 percent will refer those sites to their friends.
- The eCommerce space is so competitive these days that loyalty is increasingly hard to earn. Retailers keep trying to outdo one another, battling over categories, prices, free shipping offers, and more, which gives consumers on going access to a variety of viable ways to save on virtually any item they might want. Shoppers are, therefore, happy to hunt around for the best deals rather than sticking with specific online outlets.
If you offer easy returns, though, you’re more likely to build an audience of repeat shoppers. In a Forrester Consulting study, 81 percent of online consumers said they were more loyal to retailers with generous returns policies,while 73 percent said they were less likely to make purchases at retail sites with restrictive policies.
Consider Zappos, which offers free return shipping on every order, a policy that endears the online shoe store to its customers. In fact, its high-end shoppers return 50 percent of all their purchases. Zappos, though, regards that group asits “best customers” — and for good reason: They’re also its “most profitable customers.” By catering to their needs, Zappos continues to reap the rewards of repeated high-profit-margin sales.
A four-year Washington & Lee study of return shipping policies at two top retail websites revealed just how profitable a customer-friendly policy can be. Shoppers who received free return shipping at the two retailers increased their purchases by 58 to 357 percent. Shoppers who were charged for return shipping, on the other hand, reduced their purchases by 74 to 100 percent. It should also be noted thatcustomers who sent items back for free didn’t abuse the policy; not a single onereturned another purchase within the next two years, according to the study’s author.
Online returns obviously matter a great deal to consumers, and crafting a policy toaddress their interests will increase customer satisfaction and goodwill. Beyond covering return shipping charges, you can do so by allowing them to return items to your brick-and-mortar location(s). Another option you might consider for loyal, long-time customers is accepting returns without receipts, at least on a case-by-case basis; the privilege can be revoked if a customer exploits it. Once you have aviable policy in place, be sure to promote it (or at least make it easy to find) on your website; you can’t enjoy the fruits of an easy, convenient returns process if your customers aren’t aware of it.
If you want to retain and expand your customer base, you need to give them good reasons to continue shopping with you. The absence of customer-friendly returns policies in the online retail space offers you a great opportunity to attract a significant number of consumers — and to peel them away from your competitors. Given its demonstrated ability to help close sales and build loyalty, creating a positive return experience for your audience may be just the game-changer you’ve been seeking.
Tom Caporaso is the CEO of Clarus Marketing Group, which builds and customizes subscription programs, including FreeShipping.com, Return Saver, Travel Plus and others. Tom has more than two decades of direct marketing experience, specializing in continuity, subscription and custom loyalty programs. He’s held senior management roles in e-commerce, subscription programs, site optimization, SEM and SEO, product, marketing, sales, and client services.