Maximizing revenue retention with intelligent return fees
Samir Kamnani
·August 21, 2024
The cost of processing customer returns can take a big bite out of your bottom line.
In fact, it can cost $33 to process a returned item valued at $50, due to a combination of shipping fees, packaging costs, delivery fees, restocking, and losses from liquidation or product discounting. What’s more, many of the returned items aren’t likely to be resold, and will end up contributing to retail’s 5.8 billion pound landfill problem.
With margins already slim due to rising expenses, how can ecommerce retailers regain control over the cost of returns?
Enter intelligent return fees. By building a strategy for returns that’s customized to each customer’s journey, you’ll be able to improve your margins on returns without diminishing your customer’s experience with your brand.
To build a best-in-class returns strategy, consider these options.
Encourage customers to pay upfront for free returns
Asking customers to pay for free returns may seem contradictory, but it actually makes perfect sense.
With our new feature, Offset, you can encourage shoppers to pay a small fee upfront that will eliminate return fees in the event that they choose to return the item later on. By charging a minimal fee at checkout —say, $1.98—you’ll be able to protect your margins, and the shopper will feel confident that they can make a return later at no extra cost, rather than paying a higher price that covers the actual cost of return shipping.
Using Offset helps you bring in additional cashflow to cover the costs of returns. It also enables you to leverage all of Loop’s advanced features to deliver a premium customer experience, .
It can also help you to prevent return fraud and abuse tactics such as bracketing and wardrobing: When customers know that they’ll need to pay for returns, they’re less likely to choose multiple items with the intent of returning most of them.
Customize your use of return fees
Free return shipping is no longer the norm: In fact, more than 63% of Loop merchants now charge return fees.
You can, and should, implement return fees to help you cover your costs—but you can also set conditions for free returns in specific cases, such as:
- Product exchanges
For instance, you might charge a return fee for customers requesting refunds, but offer free return shipping for shoppers that are exchanging one product for another. By adding friction to the return process, you’ll be more likely to incentivize shoppers to choose an exchange, rather than pay the fee.
- High-value shoppers
Identify and segment shoppers with a high lifetime customer value. These customers have already shown their value to your business, and offering free return shipping is a great way to reward them for their continued loyalty.
- VIP members
If your brand offers a fee-based VIP membership program, you’re likely already offering these customers perks like early access, product samples, and personalized deals. Adding free return shipping to the mix will make your program even more enticing. - Product defects
If there’s something wrong with the product, it shouldn’t be on the shopper to pay to send it back. In situations involving defects or damage, you should guarantee free return shipping and stand behind a strong product warranty that will support the shopper with a repair, replacement, or refund, based on their choice.
Using Loop, you can build automated returns workflows that tie free returns to the customized conditions that you’ve set in your return policy. With no need to contact customer support, customers can initiate their own products returns or exchanges—and benefit from free return shipping if they meet your criteria.
Don’t ask customers to send the product back
The expense of shipping back a returned product is so often high that it doesn’t make financial sense to ask a customer to return the product. So don’t.
Offering “returnless refunds” on certain products can help you reduce your brand’s logistics costs and your carbon footprint. For instance, if a customer purchased a $10 tee that’s not worthwhile to resell, you can simply offer them a refund while encouraging them to keep or donate the item. Your shopper will benefit from an instant, hassle-free refund experience, and neither one of you will need to saddle the burden of return shipping costs.
Loop’s workflows also make it easy to designate certain products or categories as returnless refund eligible. When a customer requests a return on one of these items, you’ll be able to automatically process the refund without requesting the item back.
How return management technology helps you cut costs
Implementing returns management technology like Loop can help you seamlessly process your customers’ returns based on your brand’s policies, with infinite options for customization around return fees. That will help you build a great experience for your shoppers, while enabling you to charge for return fees in specific situations. By using the Offset feature, customers will be able to mitigate against the risk of a pricey return, leading to lower costs and a better customer experience, while helping your brand boost your profits.
Loop also helps you optimize for higher profit margins by encouraging shoppers to exchange a product, rather than requesting a refund. By incentivizing product exchanges, you’ll be able to keep the revenue from the lost sale. And in doing so, you’ll also be able to retain customers who may have otherwise been gone for good—with customer acquisition costing anywhere from 5 to 25 times more than customer retention, you’ll be able to preserve valuable profits that might have otherwise gone towards marketing acquisition expenses.
Restore higher profit margins without impacting the customer experience by implementing intelligent return fees. Learn how Loop can help by booking a free demo.
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With Loop, your brand can offer everything from refunds to direct exchanges to shopper incentives and more. Even better? These exchanges build your business.