Key points:
⮚ Free online shopping returns were practically a must-have during Covid, but the practice is now unsustainable for many
⮚ Returns are also an environmental disaster, soretailers and consumers must proactively reduce them
⮚ Consider abandoning a one-size-fits-all returns policy for more personalised options based on segmented loyalty groups
⮚ Many eCommerce websites could be working harder. Better product descriptions, images, sizing charts and augmented reality (AR)will help allow consumers to make better decisions and avoid returns.
Unless you’ve been stuck inside a shipping container for the last few years, you’ll know that customer experience is a Big Deal these days. Especially since Covid, retailers have been going all out to please their coveted customers. And as online shopping was the number one focus, free online shopping returns became an almost essential offering.
Broadly, this hard work has paid off by giving us some pretty satisfied customers. We’ve learned that shoppers have enjoyed this enriched customer service. They’ve been delighted by the personalisation, loyalty rewards and free and faster refunds. Plus, the next-level shopping conveniences of omnichannel retail have been a thrill.
But keeping customers happy is only viable if it doesn’t destroy your bottom line. And for some retailers without the deep pockets of competitors like Amazon, pressure to continue with free returns has threatened to do just that.
“Free returns became almost a must-have factor during the pandemic with the rapid increase in consumers shopping online. But times are changing, and retailers are now facing a perfect storm...”
- Jana Bowden,Professor of Marketing and Consumer Behaviour, Macquarie University
But hold tight; it appears there’s good news ahead, on a number of fronts.
For example, a recent benchmark report by US-based customer experience platform Narvar reveals the following:
- They agree with other industry experts — the standard one-size-fits-all free returns approach is not a feasible long-term strategy.
- However—they’ve discovered that 25% of consumers are willing to pay for a product return in exchange for convenience.
This is big news. Some of your customers have enjoyed your customer service so much that they are prepared to pay for it. Retailers need to seize this feedback as an opportunity to increase loyalty and retain revenue.
How so?
Offer more personalised options with your returns process to meet different customers’ needs.
Which means?
Presuming you have the software to assess and segment your audiences, you could, for example, do the following. Give better services and options to your VIP clients, and set strict rules around your devious ‘wardrobing’ or ‘fraudster’ clients you have on red alert.
So how do you know who your VIP clients are?
You’ll need a decent loyalty rewards program to figure that out. And it will need to give your customers the rewards they want. Additionally, you will need software that analyses your customer base virally.
Then, on a separate note, numerous studies point out that retailers need to step up — big time — when it comes to providing information on their product pages. (More on that later.)
Retail Express POS software integrates your bricks & clicks into one data set. It lets you sell everywhere your shoppers are, offer outstanding customer experiences, increased loyalty and more options. Get in touch to organise a free demo.
Why retail returns are an environmental catastrophe
Returns are not just extraordinarily costly and time-consuming — they’re catastrophic to the environment. In the US alone, 2.6 million tonnes of returned goods end up in landfills every year, generating 50 million tonnes of carbon dioxide emissions annually.
Then there’s the environmental cost of carbon fuel and greenhouse gas emissions caused by flying and shipping returned items back and forth across the globe.
So, in a post-pandemic world, should retailers continue to compromise profits and contribute to greenhouse emissions just to keep up with the competition? Or is it time for retailers (take Zara, for example) to draw a line in the sand?
It’s a tough call. Especially when you’ve worked like the devil on night shift to get those customers, and the mere thought of damaging your brand reputation keeps you up at night.
Is this also the retailers’ plastic bag moment?-
Some industry professionals currently describe this a s the retailers’ “plastic bag” moment.
Remember when we learned that we had to pay for grocery bags? And how it didn’t take long to realise we’d be better off fronting up with our own carry bags?
There’s no single solution to the environmental problem that the return caused. Perhaps it may take the government to step in or retailers to lobby together. Until then, to decrease emissions, analyse your business and ensure you’re making it easy for your customers to find what they want.
Why do customers return retail items?
According to the conversion optimisation website Invespcro, online shoppers return items for the following reasons:
- Received a damaged product (20%)
- Product received looks different (22%)
- Received the wrong item (23%)
- Other reasons (35%)
NB: ‘Other reasons’ often include change of mind, wrong size or product received too late for an event/activity. With apparel, 70% of returns were caused by poor style or fit.
‘Wardrobing’ is another troublesome reason for apparel returns. This is the dark practice of customers buying an article to wear briefly, only to return it the next day for a refund.
“70 per cent of (apparel) returns were caused by poor fit or style, suggesting that shopping tools are the key lever for preventing returns and improving consumer experience.” – McKinsey
How can retailers reduce in-store & eCommerce returns
To minimise purchase returns, once again, technology plays a significant role. A 2021 study by global management consultancy company McKinsey suggested that shopping tools are the key lever of preventing returns and improving the consumer experience. We list some of their recommendations — and other vital research-driven tips below.
In-store clienteling tools-
In-store clienteling is about building relationships with your customers so you can better understand their needs and offer personalised services. The more you know about your customers, the more you can give them what they want.
If you’ve switched to omnichannel retail, this makes it easier as all customer data is centralised. Using powerful retail marketing software, CRM and relationship tools, staff will know details like order status, customer history and frequency, preferences and feedback. These tools can be used both online and in store.
Loyalty programs-
When asked what made a VIP/loyalty program great, customers from the Narvar study cited instant refunds (77%) and home pickup (76%) as major benefits. Give customers what they want, and you may win them over for life. Just ensure that when you are choosing a loyalty program, check that it’s omnichannel so customers can refund or receive a gift voucher from whichever channel they please.
Reviews-
Leverage your reviews as a sales tool. Customers love social proof, and past customers can provide helpful feedback, so the customer knows what to expect.
TIP: Study your customer reviews to see what matters to your customers the most. Then use these details in your product descriptions.
Sizing guides-
Be specific and detailed. Some brands use algorithms to recommend sizes based on other brands. Others go further by allowing shoppers to create custom avatars with their particular measurements.
Alternatively, you could create an interactive sizing comparison tool that’s far more useful than inches and centimetres for your potential customers. See what Bellroy did here.
Augmented reality (AR)-
The Narvar report indicated that “retailers have yet to maximise their AR and fit technology investments or unlock the full value of sizing data customers are providing.” In other words, retailers can up their game, especially as “fit and size” was the survey respondents' top reason for returns at 45%.
Augmented reality makes online selling easier by creating visual simulations for users. They can interact with a product or see how it fits. For example, you can see how reading glasses, clothing or even hair shades might look on you.
AI-powered solutions-
Customers don’t always know what’s best for them without a live salesperson helping. Solutions like Findify make it easier. Findify is an AI-powered search and merchandising solution. It gives customers real-time personalised search, recommendations and smart collections. This gives the customer a better chance of finding what they want and, hence, a smaller chance of them returning the goods.
Live chat support-
Communicating with customers via live chat (while they browse the website) can also help increase sales. For example, Maropost’s LiveChat software offers live support with a company representative or canned responses to common questions. It also includes monitoring and analytics features and can be added to your website in minutes.
Product videos-
360° videos are always an excellent tool. Additionally, create a short video explaining a product's features and benefits. Work hard here — give the customer everything they want to know.
Product images-
Use clear, zoomable images of products from all angles. If it’s a knapsack, for example, take photos of the interior and exterior components, and show what the bag can contain. Include photos of the product in different contexts, such as someone hiking. With apparel, consider using models of various sizes, ages or skin colours as men’s fashion retailer and Retail Express client Rembrandt has done.
Product descriptions-
Be the eyes of the reader. Describe your product with helpful phrases like ‘ultra-shiny’, ‘featherlight’, ‘knee length’ or ‘fast drying’, not unhelpful words like ‘excellent’ or ‘amazing’. Describe its appropriateness for activities.
Give helpful details about sizing in your description, as well as in the sizing section (e.g. ‘True to size’ or ‘If unsure, go up a size’)
Include additional sections depending on the product. For example, include technical information (dimensions, weight), a care guide and sizing.
Follow your description paragraph with bullet points summarising the item’s specific features.
Standardise your garment sizing blocks (for apparel)-
Consistent garment sizing blocks are vital for rag traders. How can a customer know what size to purchase if your sizes keep changing? Sizing concerns are one of the main offenders for returns. Online customers regularly buy several sizes, intending to send the wrong ones back.
How can you avoid this?
Standardise your sizing blocks across all factories, so customers know what to expect. If they bought a size 12 last time, they should be safe with a size 12 this time.
You can benefit further by advertising the fact. Let online shoppers know that your sizing remains constant, and you’ll likely improve customer confidence, brand loyalty and encourage future purchases.
How to avoid returns by improving your fulfilment processes
Packaging: Choose your packaging wisely, so there’s no chance of damaging your products and causing unnecessary returns. According to Invespcro, approximately 20% of returns are due to damaged goods.
Delivery time: Get your goods out to the customer fast. A common reason for returns is the goods came too late and were no longer required — or the customer was no longer interested in the product. Be realistic if you can’t get the goods out at lightning speed. An honest relationship with your customers always encourages trust and loyalty.
Keep customers informed on their order status: Constant communication appeases any anxiety and increases anticipation, so they’ll likely place more value on the product. And having the proper inventory and fulfilment software is imperative for you to trace the order at every stage.
Follow up with useful articles: Send your customers helpful tips on using the product, so they’re not left wondering what to do with it.
Returns policy and process: this is one of the most important issues of all. Make your returns policy clear and fuss-free to read, and make your returns process simple. If it’s difficult, you can hardly expect them to come back for more.
Like to simplify your inventory process? RFID tags and handheld readers allow you to accurately track and identify objects from a distance, in store, and at every step along the supply chain. Read more here.
Should I offer free returns?{Free shipping/free returns: how to decide}
There is no quick-fix formula for retailers to decide on their returns policy. But here are some primary considerations and suggestions that may help:
- PROFITS: Business 101: you are here to make a profit. Ensure your offers are sustainable by analysing numbers carefully with your accountant.
- CAPACITY: If you offer unlimited free returns, will your returns skyrocket? Do you have the resources to handle them, and will they severely damage your profit margin?
- COMPETITION: Analyse your competition — what may be vital for returns in one industry may have room for flexibility in another.
- THRESHOLDS: Consider thresholds: most customers understand that they must exceed a particular spend before receiving free shipping or returns. Likewise, thresholds could be based on loyalty status or points.
- APPS: Would a returns app such as Loop Returns (for Shopify customers) help optimise your returns, increase repeat customers and decrease expenses?
- LOYALTY SOFTWARE: If you offer free returns, can you incentivise repeat purchases? Choosing the right loyalty and CRM software is imperative. For example, Retail Express POS software encourages further purchases by offering omnichannel gift vouchers or bonus points (redeemable in store or online).
- SWITCHING TO OMNICHANNEL: For omnichannel retailers, the returns process is often more straightforward. Customers can visit your nearest store with their online purchase, and staff can process the refund, exchange or gift voucher on the spot. There’s still some manual processing involved, but while the customer is in store, there’s a high chance they’ll make an additional purchase.
Online returns statistics (Australia & globally)
● Online return rates in Australia have doubled since 2019, according to Australia Post
● Clothing has the highest return rate in Australia at 21%, followed by shoes, bags and accessories, then consumer electronics
● On a global scale, at least 30% of all products ordered online are returned, compared to 8.89% in brick-and-mortar stores
● It costs six times as much to take a product back, perform quality inspection, repackage it and pick it for sale as it does to send it to the customer initially, according to supply chain consultancy TMX.
● 30% of items that are sent back to retail can’t be resold, according to the Australian Circular Fashion
● According to a survey by McKinsey, 86% of retailers surveyed agreed that a lenient returns policy is critical to increasing revenue, and 75% agree returns are a necessary evil
● 83% of the surveyed retailers mentioned above strongly agree that returns are a concern for profitability
Retail refunds - policy & law in AU & NZ: FAQs
Creating your retail refund policy? If you are keen to know where you stand with the retail laws, here are a few commonly asked questions and answers.
Q: Are retailers legally obliged to offer free returns in Australia?
A: The legal obligations of the retailer depend on the circumstances surrounding the free returns. A retailer is legally obliged to offer free returns for a damaged or faulty item or if they sent the wrong item via an online order. The legal requirements of ‘free returns’ depend on a range of variables. Conversely, retailers do not have the legal right to promote ‘no returns or exchanges’ policies online or in store.
Free returns might be standard for online shopping. But retailers and customers should consider the heavy carbon footprint and logistical impact of so-called “free” returns.
For example, a single item using a courier emits a minimum of 181 grams of carbon dioxide when being returned.
Q: Are Australian retail customers entitled to a refund if they change their mind?
A: As a goodwill gesture, some retailers might offer a refund if a loyal customer has a change of heart about a product they purchased. However, retailers are not legally obliged to provide a refund if the customer happens to change their mind about a particular product or service.
This includes: if the consumer has found the product or service for a reduced price elsewhere; the customer purchased the wrong-sized item in store; if they bought a knowingly faulty item (i.e. it was clearly stated at the time of purchase); or if they willingly misuse a purchased product or item and then try to get it refunded.
Q: How can I run a quick checklist to decide if a customer is legally entitled to a refund?
A: Australian customers are legally entitled to a refund if the product is not what was initially ordered or received. A reliable checklist to ensure consumers know their refund rights and retailers are aware of their legal obligations is an item, product or service must be refunded, replaced or repaired if it is damaged or faulty, or if the customer was sent the wrong item or size.
If the product doesn’t work as it is supposed to, is vastly different in function and form from its advertised image or sales demonstration, or is simply not fit for purpose, a customer is legally entitled to a refund.
Q: What are the legal returns and retail refunds policies for retailers in New Zealand?
A: Essentially, the legal retail refunds and returns policy for New Zealand retailers is along the same lines as their Aussie counterparts. For example, if a product has a major fault, the retailer is legally obliged to offer a refund.
But if the product has a minor glitch, which is easily reparable, New Zealand and Australian retailers are entitled to only offer to repair rather than refund or replace the item.
Another interesting point, and this also applies to Australian retailers, is that New Zealand retailers cannot refer customers to the manufacturer of a faulty or damaged product. The refund is the retailer's responsibility once the item is in store.
Next steps-
By synchronising all data and offering invaluable retailer tools, Retail Express can help you minimise your costly retail business expenses, improve the customer experience and deepen your customer relationships. Get in touch to organise a free demo.
