The Free Returns Dilemma: Balancing Customer Expectations With Business Reality

Research conducted by Retail Week and nShift have presented a startling yet somewhat unsurprising statistic:

“90% of online shoppers believe paying for returns is unreasonable.”

While this sentiment could be understood from a purely consumer perspective, it presents a significant challenge for retailers.

Processing returns cost on average 30% of the product's purchase price (Narvar’s Annual Returns Policy Benchmark Report), putting immense pressure on profit margins and operational efficiency.

This puts eCommerce brands in somewhat of a predicament.

On one hand, offering free returns can boost customer confidence and drive sales. On the other, the costs associated with returns can, and most likely will, seriously impact gross profit contribution.

So, what can be done to navigate this tricky terrain?

From my perspective there are three key strategies that can help you manage returns effectively whilst keeping your customers happy:

1. Build trust through clarity

2. Tackle return triggers head-on

3. Innovate cost controls

   
   

1.Transparency is Key: Clear and Accessible Return Policies

Firstly, don't let your returns policy become a roadblock to sales. Instead, use it as a tool to build trust with your customers. Here's how:

1a) Craft a clear, concise, and easily understandable returns policy.

The essence here is transparency and trust-building. By using simple language, you're not just informing customers; you're setting clear expectations from the outset. This reduces misunderstandings and potential frustration later in the customer journey.

For example, instead of saying "Items must be returned in saleable condition within 30 days of receipt," say "Return unworn items with tags attached within 30 days for a full refund."

This clarity can reduce customer service inquiries and streamline the returns process.

1b) Make your returns policy highly visible across your website.

The key here is accessibility of information. By placing your policy where customers can easily find it, you're empowering them to make informed decisions at every stage of their shopping journey.

This can reduce cart abandonment rates and increase customer confidence. Consider adding a "Returns" tab in your main navigation or a clearly visible link on each product landing page.

1c) If free returns aren't feasible, focus on other customer-friendly aspects. It is important here to find the balance between customer satisfaction and operational efficiency.

For instance, did you know that 50% of customers return items within a week, regardless of the returns policy?

Implementing a shorter returns window will have a lower impact on customer preference whilst giving you the added benefit of better inventory management oversight.

1d) Include key return details on product pages and consider providing pre-paid return labels.

This strategy is about reducing friction in the return process.

By making return information readily available and simplifying the process with pre-paid labels, you're showing confidence in your products and commitment to customer satisfaction. This can increase purchase confidence and potentially reduce return rates.

You could highlight this as: "Hassle-free returns with our pre-paid labels included in every order."

Remember, a well-communicated returns policy can actually increase customer confidence and reduce hesitation at the point of purchase.

A study by UPS found that 68% of shoppers check a retailer's returns policy before making a purchase, so make things easier for them and they will be more likely to reciprocate through purchases.

2. Prevention is Better Than Cure: Reducing Return Likelihood

The best way to manage returns?

Prevent them from happening in the first place.

Here are some strategies to consider:

2a) Create comprehensive, accurate, and up-to-date product landing pages that leave no room for surprises.

Don't just list features; explain benefits, use cases, and even potential limitations.

By providing this level of detail, you're not only highlighting the product's strengths but also setting realistic expectations.

This approach helps customers make informed decisions, reducing the likelihood of returns due to mismatched expectations.

A customer who knows exactly what they're getting is a customer who's more likely to be satisfied with their purchase.

2b) Use high-quality, diverse product images.

By showing products on different models or in various settings, you're helping customers visualize the product in their own lives.

This reduces uncertainty and the likelihood of returns due to unaligned expectations.

For clothing, show how an item looks on models of different body types. For furniture, include photos with common objects for scale.

2c) Provide comprehensive size charts and fit information for clothing and footwear.

The core idea is to eliminate size-related guesswork.

Detailed measurements and fitting advice can significantly reduce returns due to poor fit, which is a major cause of returns in fashion e-commerce.

Go beyond generic S, M, L sizing. For example: "This shirt has a relaxed fit. If you're between sizes, we recommend sizing down for a more tailored look."

2d) Leverage customer reviews and maintain an informative FAQ section.

Reviews from real customers can provide insights that your product descriptions might miss, while a well-curated FAQ can pre-emptively answer questions that might otherwise lead to returns.

Highlight reviews that speak to fit, quality, and use cases.

In your FAQ, address queries like "How does this compare to your other similar products?" or "Is this suitable for...?"

2e) Implement personalized product recommendations.

By using customer data to suggest complementary or alternative products, you're not only increasing the chances of a satisfactory purchase but also potentially increasing order value.

If someone is looking at running shoes, recommend products that pair well in addition to substitutes for that particular SKU.

2f) Offer robust post-purchase support.

This strategy is about extending the customer journey beyond the purchase.

By helping customers get the most out of their purchases, you're increasing satisfaction and reducing the likelihood of returns due to user error or misunderstanding.

Whether via chat functions or drop-in centres, this service offers a more personalized and conversational relationship that will support commitment to your brand and products from the customer.

2g) Conduct rigorous quality checks before shipping.

The core idea is prevention of defect-related returns.

A multi-point inspection process can catch issues before they reach the customer, reducing returns and enhancing your brand's reputation for quality.

Consider including a "Quality Checked" card in each package to reassure customers.

2h) Maintain an open feedback loop with customers.

By actively seeking and acting on customer feedback, you can identify and address return triggers, constantly improving your products and processes.

After each purchase, send a short survey asking about the shopping experience and product satisfaction.

By providing customers with as much information as possible, you're empowering them to make confident purchasing decisions, reducing the likelihood of returns.

Use KPI such as the 'Rate of Return' to benchmark current levels of returns and, upon the implementation of any of the strategies listed, review the changes in Rate of Return over time.

There isn’t a one-size-fits-all methodology here. Different strategies will have different impacts depending across sectors, product categories and brands.

Be flexible, try different strategies and use Rate of Return to measure which have the most impact for your brand.

3. Creative Cost Management: When Returns Can't Be Avoided

Sometimes, returns are inevitable.

When they do occur, consider these creative approaches to minimize costs:

3a) Encourage exchanges over returns.

By incentivizing exchanges, you can reduce the financial impact of returns while still ensuring customer satisfaction.

Offer incentives like, "Exchange for a different size or colour and get 10% off your next purchase."

Whilst this may not eliminate the processing costs of the return, it will at least remove the need for refunding the purchasing price, reducing the impact on your gross profit.

3b) Regularly review and optimize your shipping processes.

This is all about operational efficiency.

By continually assessing your shipping partners and methods, you can identify opportunities to reduce costs associated with returns processing.

Consider using regional carriers for certain areas or negotiating bulk rates with national carriers based on your return volume.

3c) In cases where the value of the product is low, it may be more cost effective to simply let the customer keep the product.

In some cases, the cost of processing a return can exceed the item's value. By allowing customers to keep low-value items, you can save on return shipping and processing costs while potentially earning customer goodwill.

You phrase this in line with ESG strategies: "No need to return this item. We've refunded you, and we encourage you to donate the product if you can't use it."

Remember, the goal is to find a balance between customer satisfaction and operational efficiency.

Don’t lose track of the customer aims – they want to ensure that if the product is not right, they can either get a corrected replacement or their money back.

This needs to be a simple and easy to operate process on their side, so keep that simplicity at the heart of any creative procedure or strategy.

Wrapping Up

Navigating the world of e-commerce returns is complex and difficult, but it doesn’t need to be a process that breaks the back of your operations.

By focusing on transparency, prevention, and creative solutions, you can turn the returns process from a necessary evil into an opportunity to build customer loyalty and streamline your operations.

Remember, every return is a learning opportunity.

Use the data and feedback you receive to continuously improve your products, descriptions, and overall customer experience.

In doing so, you'll not only reduce returns but also build a stronger, more resilient e-commerce business.

Your customers - and your bottom line - will thank you for it!

To discuss these strategies and how they can best support your brand, book a free consultation below!