Today’s retail landscape is tough – and getting tougher. Businesses are under increasing pressure, from reduced margins to online competition, and now they’re facing another problem.
I’m talking about ‘chronic returners’: people who deliberately buy more items than they plan to keep and know they’ll return some of them later.
This buying behaviour is having a huge impact on UK retailers, one-third of them report that they have seen an uplift in serial returners over the last year – with retailers of high-end products seeing returns rates as high as 50% during holiday shopping periods. Not only is this rise putting additional logistical pressure on retailers, but it is also contributing to a hefty annual £60bn returns bill for them.
What can retailers do about chronic returners?
Unsurprisingly, retailers are now considering what they can do to handle this troubling consumer habit – and some have even started taking action. Earlier this year, Amazon pioneered a move to ban repeat offenders and started closing accounts of customers who “request too many refunds”. On the face of it, Amazon’s action is sensible; it ensures they can continue to offer the lowest price possible to their customers. It doesn’t surprise me that other brands are starting to follow their lead.
Following Amazon’s lead, nearly half (45%) of brands are now considering banning customers that return too many items, including Sephora and Nordstrom. And other retailers are also putting plans in place to combat the situation too. Some brands, including Victoria’s Secret, now track how often shoppers make returns and whether they are abusing stores’ return policies. Similarly, Costco reserves the right to cancel the memberships of customers who make frequent or expensive returns.
How much do returns cost retailers?
Returns are incredibly expensive for retailers of all sizes, particularly as e-commerce businesses often operate on smaller margins.
Almost half of all retailers (44%) claim their margins are being impacted by the cost of handling and packaging returns. Some companies find that it can cost double the amount for a product to be returned, as it does to be delivered.
With payment refunds, customer communication and restocking warehouse shelves all costing money and valuable staff time, returns have an immediate impact on retailers. Items coming back for return can pass through as many as seven members of back-office staff – and each of these steps adds hugely to the cost.
And there are other side-effects that add extra operational manpower. For businesses with a ‘stitched-together’ back-end model, multiple processes must be done manually once an order has been placed. This includes updating a stock system, filling out replenishment reports and manually amending every single sales channel – all of which make returns particularly cumbersome.
They also render sales and profit forecasting redundant, which could spell trouble in the longer term for retailers.
Turning the tide of serial returns – with technology
Nearly half (45%) of UK brands are now considering banning customers that return too many items. The majority consider it a necessary move to protect their slim margins. In addition, one-third of UK retailers would impose repeat returner bans to save time and admin resources, showing that chronic return levels deliver considerable knock-on costs.
But stopping the flow of serial returns can only be done with the right technology – which can deliver greater data-driven insights and more options to consider when managing serial returners. Without the tools to identify or monitor who their problem customers are, companies will be working blind.
A recent study shows that a staggering 44% of retailers say that they do not have sufficient technology in place to be able to identify a serial returner. In addition, a further 15% don’t know if their current technology would be able to track repeat offenders. Using incorrect information to ban shoppers could result in a serious backlash for retailers and result in customer loss. It could also lead to damaging social media activity, as consumers become ever more frustrated with arbitrary decisions made by brands – and take to social media to vent their frustrations.
This was illustrated by recent news about TOWIE star Lucy Mecklenburgh, who was banned from shopping giant ASOS after the retailer refused her a refund when she claimed a parcel went missing. And she’s not the only one – other customers have revealed that they too have had orders cancelled without refund, been blocked from placing further orders and been told that their complaints won’t be looked into by the retailer’s customer service team. Not a good way to go about keeping customers.
Without tools to track behavioural data, brands will find it difficult to define what constitutes a chronic serial returner. And without this clear definition – and consistent application – both consumers’ and retailers’ concepts of what is acceptable will remain a subject for debate. It could lead to consumers questioning the integrity and statistical reliability of retailers’ algorithms – and diminish brand loyalty.
Exacerbating this problem further is inadequate backend technology that cannot cope with the rising returns rate. This often leaves the returns part of the process being dealt with on an ad-hoc basis or in a disjointed manner. As a result, it’s challenging to track customers’ return behaviour – and makes it difficult, or impossible, to make informed judgements and assessments about repeat offenders.
Garment Quarter is one such firm that has introduced ERP technology into its day-to-day operations to address this problem. The technology has expanded the firm’s data capabilities and given it more information on customers, including their purchasing history and return levels. As a result, the brand can now monitor serial returners to see how the trend develops over time and whether the company will eventually need to review its returns strategy.
Shoppers in favour of bans
Surprisingly, consumers seem to be broadly in favour of serial returners being banned and understand why retailers would feel the need to take such action. Over half (56%) of shoppers agree with these proposed bans, whilst only seven percent of consumers feel that banning serial returners would be unfair. However, a fifth (20%) of shoppers aged 18-24 would never shop with an online retailer that imposed bans for returning too many items.
When deciding on what action to take against repeat offenders, brands may want to consider less punitive actions – including introducing a maximum returns quota, limiting the time that customers have to return items and temporary bans. However, first and foremost, retailers should provide clear returns policies, to ensure that consumers know where they stand when returning items.
The increase in returns is proving to be an incredibly expensive burden for retailers to take on – and the one thing that’s clear to me is that more brands will now need to reconsider their approach. For example, utilising technology to both track and identify problematic serial returners early in the buying process will help retailers decide whether to charge these shoppers more for delivery and/or returns – or simply weed them out altogether.
Derek O’Carroll, CEO, Brightpearl