For merchandisers and retailers, returns have always been an inevitable part of doing business. And while it’s expected and accepted that customers will have a change of heart and make returns, the COVID-19 pandemic has had a keen impact on the rate of returns.
COVID-19 lockdowns, the closing of brick-and-mortar stores, and other health and safety factors led to more shoppers making online purchases. Because shoppers were not able to visit stores to see products in-person or try on clothing, there was a higher likelihood that shoppers had buyer’s remorse.
Furthermore, the concept of trying on apparel at home for the first time encourages shoppers to buy items in multiple sizes. Between this and the sheer increase in items bought online, the volume of returns increased significantly.
In fact, according to the National Retail Federation (NRF), returns accounted for 16.6 percent of total US retail sales in 2021, up from 10.6 percent in 2020. Between 2020 and 2021, retailers in the UK also recorded a 39 percent increase in returns.
Based on the growing rate and cost of returns for merchandisers and retailers, some brands are starting to act against serial refunders to alleviate this burden.
How to Manage the Cost of Returns
To help alleviate the cost of returns for retailers, several brands are no longer accepting free returns by mail. Zara recently implemented a new return policy where customers will have to pay a fee of $2.45 to make a return by mail. Urban Outfitters, American Eagle, Kohls, and other brands are also charging to make a return by mail, because of increasing transportation, labor, and energy costs.
It would be foolish and detrimental to customer satisfaction to eliminate returns completely. But implementing returns charges to help offset the financial impact of returns can be tricky for retailers and merchandisers to introduce to their customers.
So, the question is, how can brands reduce the rate of returns in the first place?
If customers feel more confident in their purchases initially, then the likelihood of making a return is decreased because customers are purchasing the right products.
For merchandisers and retailers, personalization provides an interesting opportunity to minimize the negative financial and environmental impacts of returns.
Best Practices for Managing and Mitigating Returns
Providing an engaging online experience with a journey that is tailored to the customer’s interest provides an easy and enjoyable shopping experience where customers get what they want the first time.
This is where valuable product recommendations, personalized experiences, and the right messaging are essential.
Here are six best practices for merchandisers and retailers to manage and mitigate returns with personalization.
#1: Add Tools and Information to Product Detail Pages to Help Shoppers Visualize Their Purchase
Often, when making a purchase online, it can be difficult for shoppers to visualize what the product will look like in-person. One way to help shoppers better visualize what they are purchasing is to provide detailed product dimensions and measurements.
This is particularly useful for furniture and home décor retailers and merchandisers. Providing this level of information on the product detail page can help shoppers decide if a piece will fit in the room before they make the purchase.
Sharing a detailed overview of product dimensions and apparel measurements is also a good way to prevent shoppers from ordering multiple sizes of products and apparel, cutting down on serial returns.
To take this one step further, retailers and merchandisers should also consider adding tools to their product detail pages where shoppers can use their smartphone cameras to help guide them in collecting accurate measurements for purchases.
#2: Personalizing 1-to-1 Recommendations Based on Customer Behavior
Merchandisers and retailers often give valuable product recommendation real estate to a single non-personalized algorithm on their e-commerce site, such as top selling products or new products. Although these algorithms are powerful, try having one or two slots personalized based on the visitor’s brand or category affinity.
Personalized recommendations not only lead to increased add-to-cart rates but also deliver a more relevant customer experience. This will increase the likelihood of a customer purchasing a product that they will enjoy and not return.
#3: Remove Return Policy Surprises
If retailers are planning to start charging for returns, they must make sure that customers are aware of this policy from the moment they start their purchase journey.
Retailers can provide this information through a variety of personalized messaging options. This can be done through triggers that pop up and notify customers of any potential charges before they get too far into the shopping experience.
If customers are aware of return charges from the beginning, this can help alleviate any surprises down the line. Awareness of this policy will also discourage serial refunders from abusing returns.
#4: Target Return Policies Based on Geolocation
Another way that merchandisers and retailers can offset the cost of returns by mail is by offering free returns in their brick-and-mortar stores. Geolocation tools on the e-commerce site or in the app direct customers to their closest store, showcasing how easy it is to make a free return.
#5: Highlight the Environmental Impact Behind Returns
Increased returns by mail mean that more delivery vehicles are out contributing waste and pollution to the environment. Optoro estimates that e-commerce returns alone account for 15 million tons of CO2 being released into the atmosphere.
Remind customers that reducing returns isn’t just about cutting costs, but also about protecting our environment and reducing waste for future generations.
#6: Update Email Recommendations in Real Time Based on the Customer’s Most Recent Visit
By leveraging email communications, merchandisers and retailers can enrich their standard customer communications with personalized product suggestions that are of interest to the recipient.
These tailored product recommendations encourage higher click-through-rates directly to product detail pages on e-commerce sites.
This personalized touch makes customers feel they are at the center of the retail experience and that the retailer understands who they are and what products they are seeking, making them less likely to seek a return.
Satisfied Customers = Less Returns
With personalization and customized product recommendations, retailers and merchandisers can help guide customers toward making a satisfying purchase the first time.
But, even if a return must be made, transparency from retailers and merchandisers about returns policies goes a long way in managing customer expectations and reducing costs.
About the Author
Meyar Sheik is the President and Chief Commerce Officer at Kibo. Prior to Kibo, Meyar founded Certona, a leader in AI-Driven eCommerce Personalization, in 2004. He served as the CEO until Kibo acquired the company in early 2019. Before founding Certona, Meyar was the CMO and COO of web analytics leader WebSideStory (now part of Omniture/Adobe). Before joining WebSideStory, Meyar was the Vice President of Worldwide Marketing and Strategic Alliances for the Enterprise Application Integration software vendor SuperNova.