In the midst of a tough year for retailers and continued economic uncertainty ahead, several major clothing brands, such as Zara and Boohoo, have introduced fees for returns. While this decision may seem logical at first glance, it is merely a temporary fix to a much more complex issue.
In a challenging economic time when profit margins are narrowing, the costs associated with fulfillment and returns to get merchandise back often cost retailers more than if customers were to simply discard the product and receive a refund. Additionally, a growing number of individuals exploit return policies by making false claims, such as returning used items or claiming they never received their order. The truth is that consumers are likely to continue abusing retailers’ return policies or start shopping elsewhere without the guarantee of a convenient and cost-free returns process.
It is important for merchants to understand that implementing fees for returns is a temporary measure. By imposing charges for returns, retailers risk playing into the hands of e-commerce giants like Amazon, who offer free returns and partner with local stores to promote convenient drop-off locations.
E-commerce retailers need a more sustainable solution that avoids damaging customer relationships. Several alternatives can be considered to develop more innovative policies and solutions that benefit both retailers and customers:
- Connecting free returns to customer loyalty programs
Retailers can tie free returns to customer loyalty programs to motivate increased spending and foster loyal shoppers. Customers who join loyalty programs are 64 percent more likely to purchase from that company multiple times and 50 percent more likely to recommend it to a friend, according to research by McKinsey. By offering this perk to loyal customers, retailers can enhance customer satisfaction and encourage repeat purchases, thus mitigating the impact of returns on profitability.
- Creating better in-store returns experiences
With 79 percent of consumers actively avoiding mail-in returns whenever possible, retailers should establish smoother collaboration between online and physical stores for returns. By enabling customers to conveniently return online purchases at physical store locations, retailers can enhance the returns process and provide a more seamless experience. This approach not only improves customer convenience but also allows retailers to leverage existing store infrastructure, reducing overall return costs.
- Improving personalization for product recommendations
By enhancing personalization capabilities, retailers can suggest products that align more closely with customers’ preferences and needs. This proactive approach reduces the likelihood that customers will return items due to dissatisfaction. This requires retailers to effectively leverage customer data, browsing history, and purchase patterns to tailor recommendations, making customer dissatisfaction less likely.
- Leveraging customer analysis to assess risk
Lastly, retailers can use customer analysis techniques to create a more holistic view of their customers. This will enable them to assess the risk level associated with each individual and then tailor returns policies accordingly. By identifying which customers have a higher likelihood of making returns, retailers can implement flexible policies to accommodate their needs, while balancing the associated costs. This method allows for a more customized approach to returns management and helps retailers optimize profitability without alienating customers.
By implementing these techniques, retailers can develop return policies that better align with their interests and the interests of consumers. Doing so fosters a positive, frictionless shopping experience while effectively improving online merchants’ bottom line.
Eyal Elazar is a policy abuse and fraud expert at Riskified. As part of the product team, Eyal works with some of the world’s largest eCommerce merchants to protect their stores from the rising threat of policy abuse. Eyal has ten plus years of experience helping business organizations grow by adopting new methodologies and technological capabilities.