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How can retailers combat online returns?


Retailers can’t ignore changing customer expectations on delivery and returns

E-commerce has opened up a world of opportunity for retailers. It’s given them an increased understanding of their customers and their needs, as well as opening up entire new marketplaces, but it has also brought many challenges.

One of the most prominent is the burden of deliveries and returns. There is a rising expectation amongst shoppers for free shipping, both when it comes to deliveries and returns.

But entirely free services are not realistic for many, if not the majority, of retailers. So what should customers reasonably expect and what should retailers offer?

Customers grow and so do their demands

By 2017, according to Forrester Research, the online retails sales market in the USA will be worth $370 billion. A massive factor in who gets the biggest slice of that tempting pie will be those that best navigate the delivery and return challenge.

ComScore research from 2012 claimed that 55% of shoppers had cancelled a purchase online due to the delivery costs. An additional 63% examine a retailers’ returns policy before they make a buying decision. These figures cannot be ignored, especially as they don’t even relate to an actual products cost or quality.

In an attempt to address issues like this we’ve seen an increase in companies of all sizes beginning to offer – often coming at a loss – free or incredibly cheap shipping. In turn, this has fed customer expectations.

Government regulation is playing a part too. Last June the EU introduced laws that give consumers as long as 14 days to return unwanted goods – no explanation needed. This is another factor that will change consumers’ outlook.

Despite its popularity with customers, free returns and delivery is not something all retailers can afford to implement – the pressure on margins is simply too great for many.

Sealing the deal

There is no universal solution for retailers to this dilemma. The capacity to provide cheap or free shipping varies hugely across the industry and also depends on the size of individual retailer’s operations.

Nonetheless, while a small independent family business may not be able to compete directly with the Amazons and Apples of the world on this matter, it doesn’t mean they can afford to turn a blind eye to the issue. They must offer the most attractive deal possible.

Smaller firms have to be creative, efficient and thorough. They need to constantly review their logistics and ensure all the suppliers and providers they use are the best possible. They must ask if they are using the right packaging? The right delivery firm? Do they need to create a minimum value order before giving free shipping? All these matters and more need to be reviewed before setting shipping costs and passing on customer savings.

A balance has to be struck between responding to competitors and being able to take the burden of shipping costs when trying to remain competitive.

Make the journey a smooth one As with delivery, retailers need to make sure they have the best returns policy they can. Absorbing completely the cost of returned items is not feasible for many.

There is also an important mind-set change needed here for many. Retailers have to yield (to a degree) to a culture which expects to be able to return anything for any reason.

US academic Dr. Amanda Bower speaks about allowing customers to ‘fail’ and making the returns process as painless as can be. If customers know that a poor shopping choice won’t lead to them suffering a major loss of time or money they are more inclined to have a favourable impression of a brand and return and become loyal customers.

Punitive ‘no-refund’ policies or high return rates may offset short-term costs, but will not help in the long game. Consumers will simply find a competitor who is more sympathetic.

It’s also vital for retailers to help with small matters, such as pre-printed labels for sending items back, or providing packaging. Making a firm’s returns policy visible and crystal clear online (and in advance of purchasing) will also offset later frustrations and confusion. The aim must always be to make the process as friction free as is possible.

Play the long game

The pressure to provide free delivery and returns will only increase over time. Retailers need to continually examine their offerings and ensure they are making use of the best technology, business practices and services to allow them to minimise shipping costs while not cutting back on quality of service. They must always ask if a policy is going to help or hinder customer loyalty.

For niche or smaller firms in e-commerce, free shipping and returns is not likely to become standard. But while all good retailers want to please the customer, it must not be done at the expense of keeping the business alive.

Published on Friday 05 December by Editorial Assistant

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