4 tips to fight the rising costs of returns
JP Arnaud-Marquez
·October 26, 2022
We’ve all felt the pain of inflation lately.
The United States’ annual inflation rate hit a 40-year high of 9.1% in June. And while it’s slowed down a bit, we’re not feeling much relief.
As an ecommerce merchant, the cost of sourcing and fulfilling your products is rising – and so is the cost of fulfilling customer returns.
As much as 40% of purchases can end up in a return, based on industry averages. And 25% of those returns end up going directly to landfills – the rest may or may not be resold, often at a substantial discount.
On average, returns cost ecommerce retailers 21% of the total order value – not counting the far more substantial cost of the loss of a loyal customer if you’re not able to continue the brand relationship. And the cost of processing returns is estimated to be 59% higher than it was last year.
These stats may all sound grim, but don’t worry – there’s hope.
Use these strategies to combat inflation and mitigate the rising cost of returns.
1. Improve your processes
First, start by controlling the types of returns that you can control: the ones that happen because of an error on your part.
In about 65% of cases, the return is due to a problem with the order: 23% occur due to the customer receiving the wrong item, 25% are due to the item looking different than it did online, and 20% occur due to the item being damaged.
To lower your return rate, focus on your returns data to understand which types of products are being returned frequently and why. If a certain brand of sweater is frequently getting sent back because it looks different from the pictures, invest in product photography with a live model so that customers can see how it fits.
If you’re seeing a lot of returns due to incorrect or damaged items, it’s a good sign that you need to improve your logistics operations. If you’re not already using one, consider switching to a reputable 3PL to manage your inventory and fulfill your orders.
2. Evaluate whether each product should be returned
When a customer requests a refund, do you really need to pay for return shipping if the product is just going to end up in a landfill somewhere? By using a platform like Loop, you can set up conditional logic that helps you calculate the cost of a return and identify the right option. While requesting the item back may be the right call in some cases, in others, it can make more sense to initiate a returnless refund.
In this case, the customer is welcome to hold on to the item or dispose of it independently – but you don’t need to tack on the shipping and handling charges for a product that you don’t need back in your inventory.
3. Automate return-related customer support requests
Many brands ramp up their customer support teams as the volume of return requests grows – it’s one of the most common types of customer support ticket.
By transforming customer returns into a self-service process, you can automate the vast majority of your return-related support inquiries. Using a self-service platform like Loop, your customers will be able to submit return requests and confirm the status of their request at any time, with the ability to choose from a menu of options for how to process their return or exchange.
Free up your existing agents to handle more intensive support requests, and avoid having to add headcount to handle return-related issues. (Your customers will be happy to have their questions answered more quickly, too.)
4. Turn returns into exchanges
When a customer returns an item, you’re not just losing the immediate sale – you’re often losing all the future lifetime revenue that you might have generated from that customer. That means it’s important to invest in processes that help you avoid churn and keep customers in your marketing funnel.
Focus on implementing returns management technology that helps you optimize for exchanges. Loop’s technology makes it a seamless process for a customer to choose any other item from your store and request an exchange – even if it’s not a variant of their original item.
Additionally, you can consider incentivizing an exchange by offering “bonus credit” that they can apply towards the cost of another item. By offering a discount on a new purchase, you can successfully maintain the relationship with that customer – which will pay dividends by helping you build a long-term, loyal relationship with that customer.
Conclusion
Ecommerce merchants will need to rethink a lot of their business operations to combat the impact of rising inflation – but by looking strategically at your processes and finding ways to optimize the way you manage returns, you’ll be able to reduce both the rate and the cost of your future customer returns.
With the right strategy and the right technology in place, you’ll be able to future-proof your business and transform your returns process from a liability into a business advantage.
Want to learn more about how Loop can help? Check out a demo.
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