by Craig Smith, UK Country Manager at ecommerce technology company SCAYLE
Free returns are no longer financially or environmentally viable for ecommerce brands. Reverse logistics cost brands one third of their revenue and produce 24 million metric tonnes of CO2 every year. Even once they have undergone a long and costly journey back to the warehouse, 44% of returned items are never resold.
Since the pandemic, retailers have seen an uptick in returns of online purchases and the emergence of the ‘repeat return offender’, a customer that habitually buys and returns multiple items, sometimes never intending to keep them in the first place.
Some retailers, like ASOS, have tried to tackle the problem of returns by asking customers to foot the bill – but this is far from a silver bullet. Firstly, brands risk damaging customer loyalty by alienating customers who are reluctant to fork out a fee. Then once the product is back in hand, the retailer is left with a ‘refurbishment tax’: the cost of refurbishing a product to a resellable state. This is sometimes up to 20% of the item’s original price.
UK retailers are stuck between a rock and a hard place. After a summer of heavy discounting to lure in customers, and with inflation only just beginning to ease, retailers have got to start rethinking returns – or at least setting reasonable expectations around them. Here’s how.
Making use of the marketplace model
We’re seeing some of the biggest names in retail take advantage of the marketplace model, enabling businesses and individuals to resell products via a secondary platform on their sites. Marketplace adopters include ASOS (ASOS Marketplace) and Selfridges (Reselfridges), with IKEA the latest giant to follow in their footsteps. This is a smart move – and not just because of the commission fees retailers stand to gain when a product is sold on their platform. These marketplace offerings encourage circular economies and help brands forge more meaningful relationships with customers.
What does this mean when it comes to returns? Well, retailers that adopt a marketplace model themselves can incentivise customers to resell unwanted items via their platform instead of returning them. They can sweeten the deal by offering vouchers or a discount off the customer’s next purchase in exchange for reselling via their own marketplace. This might be an upfront expense – but it’s likely to be cheaper than the cost of processing and refurbishing a return. What’s more, retailers can take a slice of the profits of any item re-sold on their marketplace, allowing them to take two bites of the cherry on the same item.
Educating customers about environmental impact
Another part of the returns puzzle is the educational piece. For instance, some returns travel up to 10,000 km – often only to end up in landfill. If customers were aware of the journey a parcel makes from their doorstep back to the warehouse, they might think twice before ordering a product they don’t intend to keep. Retailers can start by making the environmental impact of a return clear, both at the point of purchase and the point of return. For instance, this might look like integrating a ‘carbon footprint tool’ into the retailer’s website, highlighting the environmental impact of a return.
Maintaining strong CX – even during the returns process
84% of consumers say they’d never return to a retailer after a poor returns experience. It’s not enough to optimise customer experience all the way up until checkout, if the returns process is clunky and full of friction. Discouraging consumers from making a return doesn’t mean making it inconvenient to return an item, it just means educating the customer and offering attractive alternatives.
For instance, retailers can optimise CX for returns by adding a frictionless self-serve portal to their site, or adding a live chatbot to support customers with questions about the process. If retailers can continue to provide exceptional CX all the way through the returns process, customers are more likely to come back again.
Converting ‘returns customers’ into returning customers
For as long as online shopping exists, so will returns – they’re not going away anytime soon. But brands have got to start thinking creatively about how to approach the returns process.
When it comes to shipping costs and returns fees, it makes sense for businesses to think about margins. But instead of charging all customers a flat rate fee for returns, they can filter out ‘high return’ customers, incentivise customers to join a VIP programme that offers them free returns, or take returns into their own hands by implementing a marketplace model.
Agility and flexibility is key: brands have got to be able to implement these new offerings at speed in order to keep pace with innovative competitors. In this way, they can turn ‘returns customers’ into returning customers.
