Interviews, insight & analysis on digital media & marketing

Solving retail returns with a data-driven approach

By Tim Robinson, CVP, Blue Yonder

Retailers continue to report significant challenges around returns. Our 2024 European E-Commerce Returns Survey found that 63% of merchants surveyed state that returns are a “significant” or “very significant” problem – up from 57% in 2022.  In the UK, 68% of respondents reported that return rates have increased in the last 12 months. 

Two thirds (66%) of respondents also reported that the rate of returns they experience had increased in the last 12 months. The increasing popularity of ‘buy, try, return’ purchasing with online shopping is one issue contributing to this trend. One study revealed that over 75% of UK shoppers check the returns policy before making a purchase. This puts retailers in the difficult position of working to maximise the opportunities for customers to spend in full knowledge that many purchases will be sent back. Despite an increasing number of retailers now charging a fee for returns, one might expect a decrease in the return rate, but instead the rate is increasing. 

No two retailers are the same, they have different products, target customers, strategies and philosophies. Nowhere is that clearer than when it comes to returns. The solutions that retailers use are fragmented and inconsistent, causing issues for both the customer and retailer. The European E-commerce survey also found that despite more than half of merchants now charging for returns, the majority still see returns as a significant issue. The key lesson is that charging for returns isn’t enough to solve the core issue. 

If addressed correctly, however, returns can be transformed from a major business headache into a strategic advantage. Central to a successful approach is the adoption of the right mindset whereby returns are not just seen as a logistical challenge but a crucial aspect of the customer journey that, in many cases, could benefit significantly from reevaluation and renewal.

Crucial to this process is that retailers ask the right questions to gather insights around their returns data, including customer preferences, product performance and operational efficiencies, for example:

  • The reasons behind product returns and their frequency.
  • The cost implications of returns on a per-customer basis.
  • Opportunities to resell returned items locally or incentivise exchanges over returns.
  • The effectiveness of current logistics in handling returns quickly and efficiently.
  • The impact of returns on customer satisfaction and loyalty.

Reaping the rewards

The key point here is to identify patterns of customer behaviour that inform product development, marketing strategies and customer service improvements. To harness the full potential of returns, retailers must also capture the relevant datasets digitally and integrate them with other customer data sources. By having a comprehensive view of their data, retailers can tailor their offerings and services to individual customer profiles to improve satisfaction and loyalty. Advanced analytics can further refine this approach and allow retailers to predict trends in returns and inform stock management and marketing strategies.

The operations teams can then track metrics such as time-to-return for different methods and pinpoint process bottlenecks. By connecting returns data to order histories, customer profiles and product databases, retailers can make more informed decisions, such as offering high-value customer discounts to return in-store.

This approach not only reduces shipping and handling costs, but it also increases foot traffic in physical stores. By enhancing the customer experience, retailers can seize the opportunity to offer personalised shopping advice or immediate exchanges that better meet the customer’s needs and increase the chances of additional sales during the return visit.

Changing perceptions

In addition, digital returns solutions can be connected to order data from the merchant, allowing for a smoother customer journey. One of the biggest benefits to retailers is that integrated digital portals will capture returns data, allowing them greater visibility and control over the process. They will know exactly what is being returned, by who, and why — rather than just having items arrive at returns facilities to be processed. This gives retailers a clearer view of stock and inventory — as well as consumer insights to influence return policy, product information and overall e-commerce strategy to reduce return rates from the source.

Returns are, and will remain, a big problem for retailers. Over the past year, many merchants have implemented small changes to delivery and returns, signifying a move away from growth-orientated strategies to profitability-based ones. Where today retailers at almost all levels are mostly looking to their competition for guidance on their returns proposition, in future they should be able to look at their own data and understand where they can optimise. 

Remaining competitive 

Ultimately, a seamless and proactive returns process leaves customers feeling valued and cared for, fostering brand affinity and trust. This positive sentiment then spills over into future purchasing decisions, with customers more likely to shop with a retailer again after a smooth returns experience. Approaching returns with an analytical, customer-focused mindset allows retailers to transform this problem area into a source of insight and improved performance.