Itβs one of those magical opportunities when brand and customerΒ desires align, yet many companies donβt turn the trend into practice, leaving plenty of room for you to stand out. Itβs called a personalized customer journey.
How New Store Credit Strategies are Cutting Merchantsβ Losses
Sometimes, revenue loss prevention can feel like an impossible mission. You build a passionate team to develop, design and market the best products for that target audience youβve dedicated your professional life to support. You invest in customer service to win all customer services. And, still, if youβre in ecommerce, you could find yourself part of the 64% that consider product returns a high or very high priority. Because it just keeps happening.
In an early 2023 report, eMarketer predicted a 2.2% growth in returns this year. It might not sound much, but considering that 30% of eCommerce products get returned according to some studies, this can feel overwhelming. If thatβs not enough, eMarketer also predicts that βeCommerce returns will stay above pre-pandemic levelsβ at least until 2026.
But at Rise.ai, weβre not here to increase your overwhelm. Weβre here to talk about how you can create a customer-friendly returns policy that also keeps your profits intact.
How Much Do Refunds Cost Merchants?
The number was $600 billion in 2015, according to Reuters. Yetβ¦
Consumers are expected to return more than $816 billion worth of retail merchandise purchased in 2022, according to the National Retail Federation (NRF).
Ecommerce and offline return rates are pretty much the same for the first time in the 4 years NRF has conducted this study, it reports.
Letβs explore why consumers return so many products, then talk about revenue loss prevention strategies you can implement in your returns policy.
Main Reasons for Product Returns
Here are some of the most common reasons consumers return products. Itβs important to understand them before you start to build or change your revenue loss prevention program.
Replacing Damaged Goods: Costing Up to 17x the Original Shipping Price
Over 4% of merchantsβ revenue loss comes from returned products that canβt be sold again, or can only be sold at a lower price, reports Amcor.
If merchants replace a damaged goods product, the overall cost can go up to 17x the original shipping price, it adds.
Inaccurate Expectations are Everyoneβs Fault
Buying products online might feel as easy as clicking a button, but itβs just as easy to get the wrong impression of a product, including size, colors & more.
Some of it happens because of customersβ rush. Maybe they donβt do full on research, email in with questions, or even simply read a productβs description.
But some of it is on merchants, who need to go the extra mile, to do everything they can to set realistic expectations. Weβll give you an example of it in a bit, when we talk about the revenue loss prevention solutions merchants have found.
63% of Consumers Buy with the Intention to Return Most of Their Purchases
If youβve ever bought clothes, online or off, you know that finding your size isnβt that easy. Youβre one size with this brand, another size with that brand. If youβre buying for others, itβs probably even more challenging to find the right size. Similarly, if youβre in the midst of a home decor project, you might not be sure which item or color will work best with your current vision.
So you bracket – you buy the same item in different sizes or colors, with the intention to hopefully use one and return the rest.
And youβre not alone.
In a 2022 survey, 63% of consumers reported doing this, according toΒ Business Insider.
77% of Consumers Plan to Return Gifts – and thatβs Just During the Holidays
Getting gifts isnβt as easy as it sounds either. People might give you unnecessary items, stuff that doesnβt fit your style, something you already received for that same occasion, or a product you just bought for yourself.
Itβs no surprise, then, thatβ¦
Merchants Lose $10 for Every $100 Worth of Returned Products
Remember we said that βdamaged goodsβ is a popular reason for returns, and you have to take it into consideration when designing your revenue loss prevention program? Some products are indeed damaged in the manufacturing or shipping process. Thatβs part of life. However, apparently, when companies review the products, many more turn out reusable than damaged.
Maybe you can find some consumer innocence here. Maybe a product is reusable even though thereβs an issue with it. But there are others that return forgeries – or items that have been used (for example, worn) and damaged by consumers themselves.
The problem is so profound that βfor every $100 in returned merchandise accepted, retailers lose $10.40 to return fraud,β according to the late 2022 report by the National Retail Federation and Appriss Retail mentioned above.
Merchantsβ Returns and Refunds Policy: Strategies to Try Out
As promised, here are some strategies that merchants use, and you can try out, too.
Provide Refunds and Let Consumers Keep Their Products
As discussed above, processing returned products can get expensive. Therefore, some companies initiated a βget a refund, keep the productβ returns policy. In a discussion on RetailWire, some thought it made a perfect mathematical solution, while others were concerned consumers would abuse this refunds policy.
Howeverβ¦
- Some of the commenters pointed out that itβs very easy to recognize those who take advantage, and you can fight it, in part, by limiting the number of times each consumer can enjoy this policy.
- Another commenter suggested getting consumers through a returns process anyway – just have them send the products to a nonprofit instead of back to your company.
Regarding this latter idea, Rise.ai recommends choosing a nonprofit ahead of time and discussing with them whatβs OK to send over and what isnβt. The last thing you want to do is add unnecessary work to organizations that are likely under budgeted and understaffed, as they try to save the world.
Encourage Consumers to Resell Your Products
Not only do product returns cost merchants a fortune, they cost the environment, too.
With 85% of consumers now considering the environment in their purchases, encouraging consumers to resell your products instead of returning them is a win-win-win. To make it happen in your business:
- You can promote this idea in your messaging across your website, email list and social media.
- Aim to build a community around your brand by showcasing user generated content from consumers who have done that, and maybe found new, like minded friends along the way.
- Use a platform that helps you build a second hand site for consumers to offer or ask for products from your company at a lower cost than whatβs found on your original store. Treet, a Rise.ai partner, for example, creates branded peer to peer marketplaces, where consumers resell and buy a companyβs products in exchange for either cash or store credit.
Be More Generous with Time in Your Return Policy
A third of merchants now offer more than 45 days to finish the returning process. That number increased from 28% in 2021 to 33% in 2022, reports Narvar. Itβs βa sign that retailers believe more generous, flexible return policies are crucial to increasing sales volume,β it says.
Want to go the extra mile? Send consumers follow ups on when their returns window is closing.
Look at Product Returns as an Opportunity to Win Consumersβ Hearts Long Term
You can minimize returns, but you canβt eliminate them entirely. Theyβre part of doing business. But it doesnβt have to be a bad thing. Check out these findings:
You can minimize returns, but you canβt eliminate them entirely. Theyβre part of doing business. But it doesnβt have to be a bad thing. Check out these findings:
96% would buy from your business again if they have βa good returns experience.β
74% will likely buy one product while returning another.
In other words, to ensure revenue loss prevention, focus on providing an excellent returns experience. This can include:
- Empathy from company representatives.
- Flexibility regarding when and where consumers can return a product.
- A non-salesy incentive to give your business another try. This can be done via store credit refunds or automation of custom triggers (more on that later in the article), to give you a couple of examples.
And thereβs more. Check out these great channels to include in your returns policy:
Optimal Channels for Managing Returns for Revenue Loss Prevention
Product returns can become one of your companyβs best consumer preservation tools. Letβs explore this further.
In-Store Replacement or Shipping Replacement
In a way, in-store replacement makes the most sense, especially considering the stat above. Youβd think that, if consumers are already at your store, they might find something they like and buy that. Hey, maybe itβll be even more expensive than the item theyβre returning.
However, our returns policy canβt be just about whatβs best for us. It has to make sense for our businesses, but if we donβt align that with whatβs best for our consumers, weβre in trouble.
Therefore, whenever possible:
- Let consumers return products however they please, and
- Provide an outstanding experience, whether they do so face to face or via the post office.
That said, keep track of your data to discover whatβs most efficient and cost-effective for you. Thereβs nothing wrong with providing an incentive for consumers who return products in a way that makes your business healthier, just as long as you keep other options open for different types of consumers.
Store Credit Refunds, Cashbacks and Points
Just because one product wasnβt a good fit doesnβt necessarily make the rest of your store irrelevant to a specific consumer. One way to convince consumers to give you a second chance at such a sensitive time, as a request for a refund, is to offer a gift. The gift could be:
Cashback on their next purchase
Cashback is basically βfree moneyβ that consumers get to their account once they make a purchase. It could be enticing, but it doesnβt prioritize long term relationships with your specific brand. Itβs important to design a long term revenue loss prevention program, so the gift you offer needs to be tied to your brand.
Earned points
When consumers gain points with your company, they can gradually use them to get bigger and bigger rewards. The more they buy, the more points they accumulate. When you provide a refund, you can add points as an act of goodwill and consumer preservation. If they didnβt consider shopping around post-refund, maybe now they will. But if you want to make it even easier for consumers, consider store credit refunds.
Store credit refunds
These are a win-win for consumers and merchants alike. When you offer the option to get a refund in store credit, otherwise known as βbrand currencyβ, consumers tend to use it right away.
Offer a bigger refund using this method than you do in standard refunds (for example, if they bought a $60 product, refund $75 in store credit), and consumers are likely to take you up on your offer.
At Rise.ai we personally saw one of our merchants, Dottie Couture, a womenβs apparel and accessory boutique, reduce return costs by 42% within two months of using store credit refunds. How? Their consumers bought 300% more with the store credit refunds than the value of their first purchase.
Set Post-Purchase Custom Triggers to Reengage Customers
One of the little talked about customer retention strategies is to personalize their experience, even in the context of operating a returns workflow. In an interview with Narvar, Rise.aiβs chief revenue officer, Tom Reiss, talked about how, once you segment and personalize your message, you can set custom triggers thatβ¦
- Target people who just took action on your site – say, bought a product.
- Encourage them to take action – say, you delay the message by a few days after oneβs purchase, then offer a very quick opportunity to buy again with a special offer, store credit, etc.
As Rise.ai previously reported, the more times consumers buy from youβ¦
- The more theyβll keep buying from you.
- The fewer products theyβll ask to rerun.
- Even if consumers end up needing a refund, it likely wonβt keep them from buying from you again, given that they already bought multiple times – and presumably, had a good experience, or they would have stopped.
If youβre on the Shopify app (and even if youβre not), get a platform like Narvar, Loop (where Rise.ai has also partnered up) and Returnley. There are other options, of course, but these are the best the team at Rise.ai has found.
Start Your Revenue Loss Prevention Program with Empowered Returns Policy and Strategiesβ
Like we said, product returns are a part of doing business. Thereβs no way to avoid them, yet there are many ways to turn them into long term preservation opportunities. Store credit refunds, custom triggersβ¦ you name it.
For the next quarter, choose one strategy or tool to try out. Set goals and make a proactive plan with your team. Test it out. Optimize it. Youβll be able to see whether it works for your specific consumers and business, whether you need to tweak it, or let it go entirely. Once you have a strategy or tool that works for you, add another one, and optimize that one too. Gradually, you might find yourself looking forward to returns, because youβll know itβs the most unexpected place to delight customers and win them for life.
