As we mentioned in our recent post on protecting profits, e-commerce returns can quickly cut into profit margins and negatively impact customer satisfaction and loyalty. Yet as costly as they may be, returns — and how you handle them — are an opportunity to connect with customers and build brand integrity. Proper management of e-commerce returns before and after purchase can give you a competitive advantage in your category and even improve profitability.
In this blog post, we’ll look at strategies to minimize e-commerce returns, create clear and streamlined systems to reduce costs, and build trust in your brand to shore up customer loyalty.
The Real Numbers on E-Commerce Returns
According to the National Retail Federation, consumers returned $428 billion in products in 2020 at an estimated cost of $101 billion. Approximately 20% of products bought online are returned versus the 9% rate of brick-and-mortar stores, and the average return rate on Amazon is 5% to 15% depending on the category.
E-commerce returns happen across all categories, but some have higher rates than others. Women’s apparel has an average return rate of 23%, while beauty products are only returned 4% of the time. Regardless of the rate, nearly two thirds of online shoppers expect retailers to allow returns for up to 30 days. On the plus side, 92% of customers say they will buy from a brand again if the returns process is easy.
Most Common Reasons for Returns
Understanding the reasons why customers return items is the first step to reducing e-commerce returns for your products. Major online marketplaces like Amazon often have customers flll out a survey during item returns and exchanges. According to the data, the most common reasons customers give for returning items are:
- Size too small: 30%
- Size too large: 22%
- Other or not specified: 18%
- Changed my mind: 12%
- Style: 8%
- Not as described: 5%
- Defective: 5%
By adding additional product information and specifications to your listings and A+ content, you can ensure the customer has accurate expectations for what they are buying, thus mitigating many of these common e-commerce returns reasons. But minimizing returns is only half the equation.
E-Commerce Returns and Customer Loyalty
When a customer trusts that they can easily return an item, they shop your product line with more confidence and spend more freely. Most retailers issue a refund for the purchase price, while only about 18% offer exchanges or the same amount redeemable for future purchases.
Simply offering returns is not enough, however. The return process itself must be as easy and pleasant as the purchase was.
Best Practices for Online Returns
Here are a few best practices to implement and follow for e-commerce returns:
- Make your returns policy easy and clear. A clear and easy-to-find summary of your policy, including timeframes and exceptions, sets expectations and builds trust with your customers. Clear deadlines help with predicting revenue and encouraging customers to return products more quickly, so you have more opportunities to resell the items. It can also minimize calls and emails to customer support, which saves time and money. Make sure labels are easy to print.
- Offer free return shipping. Free shipping on return items is expected by most online shoppers these days and can be the determining factor in a purchase decision. This means that while you might lose money on the actual returns, you can increase conversion rates and customer loyalty by offering free returns. If the cost is too high, you can get creative by making the free return window shorter to encourage faster product turnaround and adding a fee for later returns.
- Use images to illustrate the process. Images, graphics, and icons help customers visualize the e-commerce returns process and have a bigger impact than just words on a page. This way you can use your returns policy to connect with your customers, showing them that you care about their shopping experience at every stage.
- Know the laws and stay up-to-date. Under U.S. federal law, you must accept returns on any defective merchandise, and customers have three days to change their minds and return any product over $25. Check your state laws for any additional provisions that might impact your returns policy. Online retail is constantly changing, so keep up with current industry trends to make sure your policies are in line with industry standards.
- Engage with Customers. Far from being the end of the experience, e-commerce returns are an opportunity to connect with customers who have already purchased your products and learn more about their likes and dislikes. Listen to their concerns and frustrations. Read reviews and use the feedback to improve product listings and the buying experience. Showing your customers how much you care can turn a negative experience into a positive one, building greater brand loyalty and improving future sales.
- Track your rate. It’s no secret that e-commerce returns are expensive, which is why you must pay attention to your return rate as a key performance indicator (KPI) for yourbusiness. The industry standard for returns is between 15% and 20%, so calculate your average using data for your business. If you are under 15%, you’re in a good position, and if you’re over 20% and not in a high-return category like apparel, look at strategies to reduce your return rate like updating your product listings and analyzing customer reviews.
The Hidden Bonus of Free Returns
The data shows free e-commerce returns are appealing to customers, almost as much as other perks like free shipping. If you cannot afford free shipping on every purchase, offering free shipping on returns is a way to attract more customers and increase sales. Not every customer will return their purchase, so your costs will be lower than if you tried to ship every order for free.
The returns experience can also help you build more loyal customers. Most shoppers expect to have a bad experience when making a return, so use e-commerce returns as an opportunity to connect with and delight your customers. Studies show as many as 57% of customers who purchase online have returned items, over half of all customers. With numbers this high, you can’t afford not to engage with customers who make returns. If done correctly, the return process might just be where you win a customer for life.
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