Is your returns policy hurting your bottom line?
JP Arnaud-Marquez
·April 1, 2022
As an ecommerce merchant, you know customers have a lot of choices for where to buy their products.
In order to capture market share, you need to have great marketing, great products, and competitive pricing. But there’s one factor you may not have thought as much about: your returns policy.
In fact, a good returns policy is one of the main factors that customers look at when they’re deciding whether or not to make a purchase online.
About two-thirds of customers check your brand’s returns policy page before deciding whether or not to make a purchase from you. And 73% of shoppers say that their returns experience will impact whether they’re likely to buy from that shop again. Shoppers won’t buy from a retailer where they’ve had a negative returns experience 84% of the time, while if they have an easy returns experience, they’re likely to try out the merchant again 92% of the time.
Online shoppers return, on average, between 15% and 40% of their purchases, so understanding their returns experience is an important consideration when determining where to shop. If customers think that they’ll need to spend 10 minutes waiting on hold to talk to a customer support representative, or that they’ll need to face an interrogation over email before they can return a product, they’ll likely have second thoughts about clicking that “buy now” button.
So if your brand hasn’t developed a generous, flexible returns policy that puts the customer first, it’s time to get started – or you may see your company lose out on sales to brands that do.
What to put in your returns policy
How generous should your returns policy be?
It depends on the brand, but in some cases, being overly generous can be a differentiating advantage over your competitors. Here are a few elements worth considering:
- Free return shipping: Only 50% of brands offer free return shipping, which is a feature that 80% of customers say they’re looking for. By spending the few extra dollars it takes to cover costs for return shipping, you’ll be on your customers’ shortlists instantly when evaluating brands. If you decide to offer free returns, make that a big part of your marketing message. It should be prominently featured on your home page, on every product page, and in your marketing literature. That will help encourage customers who are unsure about your brand to give you a try, or to buy a more expensive product with the knowledge that they won’t be penalized if they decide to send it back. It will also encourage customers who love your brand’s generous policies to spread the word to friends and family, helping you generate a larger audience through word-of-mouth referrals.
- An extended returns window: The majority of brands set their returns window to a 30-day period – but we’ve found that most brands’ returns come through within the first 14 days. That means you can afford to be much more generous with your returns policy, knowing that most customers will return in the first two weeks anyway. Setting a longer window won’t lead to more returns – but it will lead to more sales in the first place, because customers feel more confident knowing they could choose to return something if they wanted to after a longer window. That’s especially helpful in situations such as Christmas shopping, where many items will be purchased as gifts and may not be opened for a couple of weeks in the first place.
- Returns on pre-worn items: Want to be extra generous? Consider adding your name to the smaller group of merchants that actually encourage customers to wear their products out in the wild – and if they’re not happy with them, return them anyway. The shoe brand Allbirds, for instance, offers a “no questions asked” returns policy that encourages customers to try out their shoes for 30 days, and to send them back for a full refund or exchange if they’re not happy with them. Make sure to set your policy clearly to ensure that customers understand which items are and aren’t eligible for pre-worn returns: For instance, Allbirds’ offer applies only to its shoes, while items like socks and underwear must be in their original packaging.
When drafting your returns policy, make sure to use clear and simple language. Customers don’t want to read pages of legalese to understand what they can and can’t return – you should be able to get your point across in a paragraph or less.
Building a better customer experience in returns
In addition to making your returns policy generous and easy to understand, it’s also important to optimize your processes so that customers don’t need to wait around for a response when requesting a return or exchange.
That means they shouldn’t need to talk to a human unless they have questions about the process. Instead, it’s important to deliver a flawless customer experience that allows customers to self-service their return and exchange requests, and helps them find a replacement if needed.
Using a returns management software solution like Loop, customers can select from multiple choices about why an item is being returned, which will be customized based on the product category: For a pair of jeans, the customer might be quizzed on product fit, among other possible options for return reason.
The software can then find product replacement ideas in response to their needs. For example, if the size 4 jeans were too small, Loop will pull from your brand’s real-time product inventory to find the right fit for them, recommending the same jeans in a size 6, or, if that’s out of stock, a slightly different color or fit in size 6. This streamlines the process of finding a replacement item, ensuring that the customer can get what they want without having to hunt for it. As a result, customers will be much more likely to request an exchange than a return: Loop customers retain an average of 40% of revenue on returned items through product exchanges.
Make returns a profit center
No retailer is a fan of product returns, but by setting generous return policies and building seamless self-service workflows that deliver a great customer experience, you can transform returns from a cost center to a profit center.
You’ll be able to win over more customers with flexible policies and features like free return shipping, and encourage your existing customers to spend more with the confidence that they can take a chance on items they’re not sure about, with no risk to them.
And by using automated returns management software like Loop, you’ll be able to cut down on customer support hours, and automate the entire returns and exchange workflow, while incentivizing customers to exchange products rather than sending them for a refund.
A customer seeking a refund may never buy from you again, but by encouraging exchanges, you’ll be able to continue that customer relationship, and increase your lifetime revenue from each customer.
On the surface, it may seem like you’re giving up potential profits by committing to hassle-free returns, and free return shipping – but you’re actually doing anything but.
By committing to a great returns experience for every customer, you’ll be able to boost your customer acquisition and retention, ensuring that customers know that your brand stands behind its promise. That will pay dividends in the form of long customer relationships with high lifetime revenue, and plenty of word of mouth referrals.
So if your returns policy is costing you customers, it’s time for a revamp. Want some help? Contact Loop.
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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.