Current internet advancements in delivery capabilities are resulting in smaller retailers taking advantage and maximising their reach by selling through online marketplaces. These marketplaces are a great way for retailers of all shapes and sizes to gain exposure and boost sales. But, the negative connotation of this is increased returns.
Those increased returns are made even more complex by the requirement to mirror the return policies stipulated by the marketplaces. For example, Amazon now requires third-party sellers to accept “automatically authorised returns”. Under this guise, retailers must accept returns without having any direct contact with the customer, a point at which many businesses would try to resolve customer issues to preclude returns.
However, there are ways for retailers to take control of online returns which is critical in this competitive environment. Andrew Tavener, Head of Marketing at Descartes Systems UK discusses four considerations online retailers should take to tighten the returns process:
Rethinking returns policies
Online marketplaces could be seen as an opportunity for retailers to rethink their returns policies. Recent research reveals, nearly half of shoppers (47%) said they would be unlikely to shop with a retailer again if it charged for returns, and 60% would be less likely to shop with them again following a difficult returns experience. Clearly, a well thought out returns policy is critical to good customer relations.
Sellers need to decide whether to offer one return policy or different policies for each marketplace/channel or for various product offerings. If sellers choose an “Amazon-style” return policy with instant returns and free shipping, this can be promoted up front as part of a company’s brand. Overlooking the impact of a poorly considered returns opportunity can be costly, a simple online returns process helps to drive sales and cement customer loyalty.
Return rates – implementing a policy that works
Evaluating whether the return policy of a particular marketplace works is a critical part of the business decision to sign up in the first instance. Organisations should consider right-size return policies based on industry standards and actual return rates. Returns can have a big financial impact on profits and depending on the industry, return rates can be very low or very high. For example, book and video returns can run two / three per cent, while clothing and jewellery can run upwards of 30 per cent.
Businesses with healthy profit margins can build the cost of returns into a product’s price. Charging restocking fees or not accepting online returns is less common but, for certain products or industries, it makes financial sense. For example, companies selling new laptops might find a restocking fee to be the only way to support thin margins. Likewise, for clothing subscription services a restocking fee for returns makes sense since the items are essentially specifically tailored for an individual.
Sellers should right-size returns automation based on business needs
Small retailers with low return returns can often manage them in-house, using cloud-based shipping solutions that simplify printing or electronically creating return postage labels that customers print themselves. Barcodes on labels quickly identify customer records and product numbers to speed the return process, cut down on errors and save time.
Large retail operations, however, may need a great deal of automation. Integration with internal systems is pivotal for high return volumes, returned packages sitting on the warehouse floor cannot be effectively put back into stock without the right system in place. Connectivity must flow from the customer to the warehouse to the shipper into marketing, sales and accounting.
For companies with few internal fulfilment resources, a third-party processing service can help. Merchants need to weigh the benefit versus the cost of using fulfilment and returns processing by marketplaces or third-parties. Another way to manage returns if there isn’t adequate in-house resource is to monetise returns by sending returned merchandise directly to a reverse logistics partner that liquidates inventory.
Preventing returns from cutting into profit
Unnecessary returns can be prevented with good customer service. Efficiently supporting a customer problem, rapidly replacing missing/damaged items or making exchanges can all help to avoid returns. But, heading off an unnecessary return is hard when marketplaces allow automated returns with no merchant contact.
To combat this, sellers should use scan-based return labels when possible. With these labels, retailers are only charged if the label is used. Some retailers report that 10 percent or more of the requested returns are never actually used, making scan-based return labels an instant money saver.
Finally, it’s useful to track which products are returned and why. Businesses should develop a “reason for returns” report by manufacturer and stock keeping unit (SKU). This allows vendors to troubleshoot and avoid future returns.
Return policies are no longer just part of a company’s back-room logistics strategy. They’re a valuable lever for brand equity, it’s become the responsibility of the retailer to offer convenient and simple return options for customers, and the return burden is on their shoulders. Changes in return policies by Amazon and other marketplaces are an opportunity for retailers to take charge of their returns.
This is a chance for online sellers to provide stronger customer communication and loyalty, reduce the impact of returns on the bottom line and streamline their logistics processes.