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Online shopping is thriving, and it\u2019s a market that continues to grow year over year. In an April 2017 survey shared by Statista, 40% of consumers stated they purchase items online at least several times per month<\/a>. As many as 20% admitted to shopping online on a weekly basis.<\/p>\n <\/p>\n In 2014, total worldwide ecommerce sales equated to $1.3 trillion. Cumulative data presented within The Enterprise Guide to Global Ecommerce shows worldwide ecommerce sales reached $2.3 trillion in 2017 and are forecasting $4.5 trillion by 2021<\/a>.<\/p>\n Unfortunately, with the increase in sales comes the problem of customer returns.<\/p>\n <\/p>\n Contents<\/p>\n <\/p>\n In 2017, U.S. return delivery costs amounted to $381 billion and is expected to reach $550 billion by 2020<\/a>. Seeing return rates hover at around 20% has become the norm for many ecommerce retailers, with returns spiking to 30% or more during holidays<\/a>.<\/p>\n With the rising costs, it\u2019s critical for retailers to evaluate how they manage ecommerce returns. You want to protect profit margins without damaging customer satisfaction<\/a> and customer lifetime value.<\/p>\n In this post, you\u2019ll see the main drivers for online returns, how to reduce the cost of returns and recommendations for improving ecommerce returns management.<\/p>\n You\u2019ve likely seen a variety of reasons for customer returns. It ranges from an item that didn\u2019t fit to a damaged product or a gift purchase that was returned. Your customers return products for many reasons, and every return is a direct hit to your bottom line.<\/p>\n It\u2019s a significant hit when you consider just how many customers return products. 89% of customers have returned an online purchase<\/a>.<\/p>\n The leading causes for product returns<\/a> for online purchases include:<\/p>\n But in some cases, there\u2019s no real problem with a product, or even with the retailer. 41% of customers purchase products with the intent of returning the product<\/a>.<\/p>\n This growing trend in online shopping isn\u2019t intentionally malicious. In fact, it\u2019s a trend that\u2019s developed specifically because of the industry itself. The introduction of try-before-you-buy with ecommerce is likely a major contributor.<\/p>\n Online marketplaces and retailers like Amazon<\/a>, Sephora, and Warby Parker are popularizing a new business model allowing customers to try on products with absolutely no upfront cost. Instead, the customer returns unwanted products and they\u2019re only charged for what they choose to keep.<\/p>\n Experts struggle to attribute rising order returns to the try-before-you-buy model. However, a 2018 study found that since the emergence of the try-before-you-buy model, 40% of US and UK retailers have experienced a spike in returns<\/a>.<\/p>\n Research has consistently shown us that customers prefer anything that\u2019s free. Free shipping<\/a> has been shown to improve conversion rates and 79% of consumers want free return shipping<\/a>.<\/p>\n Your customers are just returning products as part of the normal shopping experience.<\/p>\n And they\u2019re definitely your customers. They\u2019re not necessarily random first-time shoppers you\u2019ll never see again. In fact, 77% of returns come from repeat customers<\/a>.<\/p>\n And that product return doesn\u2019t mean they\u2019ll never shop with you again.<\/p>\n As long as you make the process easy and continue focusing on customer satisfaction, they\u2019re far more likely to continue shopping with you. As many as 92% of consumers will buy something again if returns are easy.<\/p>\n Return fraud does happen, and you can read about that in our blog post on creating a great return policy<\/a>.<\/p>\n If you\u2019re a small retailer you can handle online returns easier when the volume of sales matches the scale of the business. In this setting, your online returns management system<\/a> is often manual. You might have one or two return people from the point of contact requesting a return to the item being restocked and replaced or refunded.<\/p>\n But that approach isn\u2019t scalable and as your ecommerce sales volume increases so do your returns management costs.<\/p>\n To manage returns, ecommerce businesses typically add workers, increase or designate warehouse space for returns, and even establish separate departments just to handle returned products.<\/p>\n For larger incumbent brands, the return cost as a percentage of revenue is just 2%. For smaller entry-level brands and growing SMBs, that return cost as a percentage of revenue is 48%<\/a>.<\/p>\n Aside from refunding the revenue from the sale of the item, there are various other costs at play that impact profit margins:<\/p>\n For the average business, managing the return and repair process can account for around 10% of total supply chain costs. However, if your ecommerce return management process is poorly planned and inefficient, it can compound the cost and reduce profit by 30%<\/a> (or more).<\/p>\n A cumbersome ecommerce returns management process is also guaranteed to frustrate your customers. You\u2019ll lose a significant chunk of revenue due to the loss of repeat business.<\/p>\n A study from Forbes Insights found that among the top reasons, customers don\u2019t return, 21% of retailers<\/a> attributed customer loss to poor experiences\/customer service.<\/p>\n <\/p>\n Customer returns are a part of retail, whether online or in a physical store. While you can\u2019t eliminate returns completely (and refusing to allow returns will only hurt your business), you can do a lot to reduce customer returns in a cost-effective manner.<\/p>\n The first step is to review your logistics for handling returns. Every business should have a plan for reverse logistics<\/a> or the process of products returning to inventory from customers.<\/p>\n Benchmark your current return process from the point of customer contact through to resolution. Audit this process and treat every bottleneck as an opportunity to improve the process.<\/p>\n Take into account:<\/p>\n For a smaller ecommerce retailer, it may be easy to designate just a few people (or one person) for handling returns with your existing cloud software. For larger and growing operations, you may find it necessary to automate some or all of the return process.<\/p>\n Unfortunately, automation can be difficult. Even with modern ecommerce platforms, easy integration isn\u2019t always available between the platform and the warehouse management system<\/a> or order fulfillment system<\/a> you\u2019re using. That can result in time-consuming manual work for requesting and entering information.<\/p>\n It\u2019s an inefficient workflow that\u2019s prone to errors. You may lose records and experience delays in return processing.<\/p>\n Automating the ecommerce returns management process is likely the most ideal choice because:<\/p>\n The simple act of having an ecommerce return policy<\/a> can impact your sales and influence whether a customer chooses to shop at your store. According to a UPS study, 88% of shoppers review return policies while shopping online, with 67% checking the return policy before completing a purchase.<\/p>\n Unfortunately, 15% of shoppers will completely abandon the purchase if the return policy is unclear or unfavorable.<\/p>\n Make sure your return policy is easy to find and the language is clear. Likewise, consider updating your return policy so it\u2019s more customer-centric. Points to consider:<\/p>\n One study published in the Journal of Marketing found that free returns could boost consumer spending by 158%\u2013457% when stacked against pre-return spending<\/a>. Another study from the University of Texas-Dallas found that a lenient return policy with a longer return window can result in more returns but correlated with an increase in purchase volume.<\/a><\/p>\n How does your return policy impacts your business:<\/strong> Learn how to sell more with a great ecommerce return policy<\/a>.<\/p>\n Learn how to reduce packaging costs<\/a> in ecommerce business.<\/p>\n Even if you have a documented and automated return process in place, take the time to regularly audit your warehouse team in charge of outbound shipments and handling product returns. Look for deviations or bottlenecks that increase the cost of handling returns like mishandled or misplaced products coming back into stock, packaging delays, interruptive workflows, etc.<\/p>\n Monitoring your picking and packing workflows is the best way to discover issues that can cause improper products from being shipped. Drs Foster and Smith reduced returns by 74.7%<\/a> when it introduced paperless scanners from its pick-and-pack process.\u00a0<\/a><\/p>\n A good portion of returns happens because the product received doesn\u2019t match what the customer ordered. You can dramatically reduce this by improving the quality of product images on your website.<\/p>\n Another way to reduce returns is to add product videos on your product page. Ice.com saw a 3% reduction in returns<\/a> when shoppers viewed a product video.<\/p>\n The social proof is in the product review. As many as 92% of consumers turn to reviews before making a purchase. But they\u2019re good for more than just getting prospective customers to make a purchase.<\/p>\n When comparing customer purchase and return behaviors, PETCO found there were 20.4% fewer returns on products that contained product reviews.<\/p>\n Most ecommerce platforms such as Amazon Seller Central<\/a>\u00a0include basic review functionality for products. To ensure your reviews are working in your favor, consider a 3rd<\/sup> party app like Yotpo<\/a> that gives you more review and testimonial functionality with reviews that stand out in your online store.<\/p>\n Customers want to know it\u2019s easy to return a product and 85% won\u2019t return for another purchase if the return process is complicated or inconvenient. Involve your customer and ensure a hassle-free return policy.<\/p>\n Reach out to every customer after a return is complete to get their feedback on the return process. If there is any friction during the return, your customers will likely be all too willing to let you know.<\/p>\n A smaller retailer can probably send a follow-up email manually, which has the benefit of a more personable shopping experience. A scalable solution would be to trigger an automated survey sent to customers once a return is complete.<\/p>\n Whatever approach you take, make sure you\u2019re reviewing and listening to your customers. They\u2019ll let you know exactly where the return process is breaking down and costing you repeat business.<\/p>\n WMS software helps ecommerce businesses manage returns efficiently and effectively by providing powerful visibility into returns data and flexibility for getting items back into the supply chain. Plus WMS solutions optimize warehouse processes, including the efficiency of reverse logistics and returns management operations. This helps to keep the disruptions and costs brought on my returned goods as low as possible.<\/p>\n More specifically, WMS software focuses on helping with three primary aspects of ecommerce returns management: inventory tracking, order management, and automated workflows.<\/p>\n Inventory Tracking<\/a>:<\/strong> The inventory management functions of a WMS solution make it easy to stay on top of fluctuating inventory levels. As returns make their way back to your fulfillment centers (or return centers, depending on your network), your WMS is able to adjust product levels based on whether or not a return can re-enter the supply chain. If not, you WMS can track that too.<\/p>\n Order Management<\/a>:<\/strong> When your WMS is alerted of a return (whether through your ecommerce channels or system alerts), you are able to review all the necessary data needed to execute what happens next. If the return was due to a mis-shipped item, for instance, your WMS will help you execute the correct order and get your stock back in order. If the return is due to some other reason, it can also help you execute credits\/reimbursements thanks to integrations with your ecommerce stores and accounting systems.<\/p>\n\n
A Look at U.S. Product Return Costs<\/h2>\n
Why Do Your Customers Return Products?<\/h2>\n
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Try Before You Buy May Increase Your Returns<\/h2>\n
What Does Poor Ecommerce Return Management Cost You?<\/h2>\n
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How to Reduce the Cost of Returns<\/h2>\n
Setting up a returns policy to streamline the return process<\/h3>\n
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Automate the return process<\/h3>\n
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Adjust your return policy<\/h3>\n
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Review Your Product Packaging<\/h3>\n
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Audit Your Warehouse<\/h3>\n
Improve Your Product Images<\/h3>\n
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Leverage product reviews to improve your offering<\/h3>\n
Solicit Customer Feedback (and Follow It)<\/h3>\n
The Role of WMS Software in Ecommerce Returns Management<\/h2>\n