How do you solve a rising rate of returns? It’s a question which has been asked with more frequently over the last twelve months as retailers grapple with an increasingly returns-savvy customer base.
There’s no denying that businesses are feeling the impact. Rebound data indicates that returns cost UK retail £6.6bn a year in processing fees and spoiled stock, and steps should be taken to address this. A recent study found that more than half of UK fashion and clothing retailers would consider ‘banning serial returners’ and the likes of Amazon have already taken steps to penalise customers who send back too many items. The same study found 44% of these don’t have the technology to correctly identify a serial shopper. To my mind, those who follow this path – particularly ecommerce brands – are treading a dangerous line which risks future sales.
Returns are an essential part of the industry and have long been seen as merely an irritating cost of doing business. Yet returns are a vital part of the customer experience, and taking a blanket approach – without diving into the data – will cause online retailers more harm than good.
Data shows that around 20% of customers generate 80% of refunds and within this small group sit some of the most and least profitable customers. Distinguishing between these different returner personas requires a deeper, more nuanced examination of data.
Take ‘wardrobed’ returns as an example. Our own research found that two thirds of clothing retailers believe shoppers regularly purchase items with the express intention of wearing and returning. Yet the numbers do not justify the suspicion – anonymised surveys reveal that just one in ten customers wardrobe, and of those who admit to returning worn items only 5% have done so more than once in the last 18 months. With so much data available, retailers cannot afford to allow hunches to drive strategy.
Our data shows there is a direct link between the more items a customer buys per order and their returns net profitably. Moreover, shoppers who return in high amounts but stay with the same brand often see their returns per order decline over time – they become better at identifying their preferred sizing, fabrics and general fashion sense, so decrease the number of returns they make, all while remaining loyal to the brand.
Banning repeat returners would cut off this subsection of customers who keep more than they return and eventually police their own returns behaviour anyway. This shortsighted, knee-jerk reaction would limit retailer revenues in the short term and risks cutting off a valuable stream of data that retailers could be using to enhance the purchasing experience in the long term.
The returns process provides a fantastic opportunity for customers to feedback invaluable information, including concerns around incorrect sizing, misrepresentative product images and unclear item descriptions. A high returns rate on specific products or sizes can indicate issues with how these items are being marketed or sold, and can be used to improve the customer experience. Implementing a returns process which emphasises the importance of customer feedback will help retailers continually optimise and play for the keep – not just the initial sale.
Banning repeat returners is a shortsighted move than overlooks an individual customer’s lifetime value and reveals quite how little the retailer understands about their customers’ behaviour.
We should also recognise that customers are simply responding to conditions enforced by retailers such as free shipping thresholds, endless in-session upsells and multibuy offers that encourages consumers to buy first and choose later. It is hardly surprising that return rates increase as a result, but instead of seeing a dire consequence, retailers should recognise a golden opportunity. Cherish – and learn – from your repeat returners, instead of sending their money and lessons into the arms of your competitors.
Graham Best, Rebound CEO