A guide to optimizing your returns costs
JP Arnaud-Marquez
·November 8, 2022
As the big Black Friday-Cyber Monday shopping season approaches, you’re probably gearing up for a high volume of sales – but make sure that you’re all set to ramp up your returns, too.
It should go without saying, but not every gift is going to be a hit with the recipient. Last year, almost 21% of holiday season purchases bought online were returned.
You wouldn’t be a competitive merchant if you didn’t offer a generous returns policy, but a high return rate can seriously impact your profit margin – especially when you factor in related reverse logistics costs, including shipping and processing the returned item.
And in many cases, returned items can’t even be resold: In 2020, almost three million tons of returns ended up in landfills.
Returns cost even more when you think about the fact that many returns end up with a lost customer. Every time that happens, factor in acquisition costs for a new customer, which are five to 25 times higher than the cost of keeping an existing customer.
Like death and taxes, returns are always going to happen – but there are plenty of ways to curb their impact on your business.
Here are a few strategies for optimizing your return costs:
Use automated workflows to replace live customer support
Returns-related questions can be a drag on your customer support team, especially over the busy holiday season. If you handle all of your returns manually, you’ll likely need to scale your CS team significantly during the post-holiday return boom to make sure that you can accommodate your customers’ requests.
Even then, they’ll likely still be left waiting on hold or playing email tag with your agents, leading to a frustrating customer experience.
Instead, use automated technology to help you handle more support and return requests without needing hands-on support.
You can implement chatbot technology that will help customers find where they want to go, whether that’s to check on an order or return status, to place a new order, or to initiate a return. Provide customers with questions or links to help guide their journey through your website or app, with the ability to do an automated look-up to get details around their order or return.
Automation can also optimize the returns initiation process for customers. Rather than contacting support to request a return, customers can self-service their return requests on an automated returns management platform like Loop.
When using the platform, customers can go directly to a returns screen that shows them the items they’ve purchased that are eligible for a return. They can then request a direct exchange, store credit, or a refund, and immediately receive a printable return shipping label or a scannable QR code to take their package to a nearby drop-off center.
Customers have all the tools to complete a return independently, with no need to involve your CS team at any stage – helping you avoid adding to your labor costs, and reserving your agents’ time for more specialized situations that warrant personal attention.
Optimize your shipping routes
As your orders and returns both add up, consider shifting from in-house fulfillment to a third-party fulfillment solution (3PL). When working with a 3PL, you’ll ship them all of your inventory, where it will typically be split up and distributed among multiple warehouses.
That means you’ll be able to ship your products to customers faster and more efficiently, using the best warehouse location for each customer address. The same is true of the reverse logistics process: As customers request returns, you’ll be able to save money on shipping by routing the product to the closest warehouse.
You can also use Shopify add-on apps that help you instantly identify the best shipping carriers and products for any particular order or return.
Shipping costs can vary by product type, weight, location, and a number of other variables – using a shipping app will help you drill down on the most efficient and affordable way to route back any specific order, helping you get items back into inventory more quickly so that they can be resold.
Determine which items require returning
With as many as one-third of returns ending up in landfills, requesting a return isn’t always the best strategy for your brand – even if the customer doesn’t want to keep the item.
By offering a “returnless refund” on certain items that wouldn’t be profitable to request a return for, you’ll be able to avoid shipping and processing fees on items that aren’t likely to be resold, and can encourage customers to recycle the items on their own or pass them along to a friend. The customer will still receive a full refund for the item, even if they keep it.
Using a platform like Loop, you can set up conditional logic to determine which items qualify for a returnless refund. Certain products may qualify based on category, condition, weight, or other factors – you can set up a series of custom rules that will determine whether an item is authorized for return shipping or not, and provide an instant decision for the customer.
Making sure that only the items that are profitable to resell end up shipped back is a great way to save costs on return shipping, while also helping you grow a more environmentally sustainable business.
Are you ready to optimize your returns process and lower the cost of processing returns? Get in touch to see how Loop can help.
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