Logistics & Fulfilment

How to transform returns from a costly headache into a profit centre

For most retailers selling online, returns generate their greatest customer service challenges and inevitably drain profitability. But that need not be the case with careful planning and the deployment of the right technology.

“Up to 30 per cent of your sales may end in a return, and up to 50 per cent of an item’s original value makes up the return cost, including shipping, warehousing, and labour costs,” explains Tara Daly, senior director of product marketing at Loop Returns. 

At a time when retailers are under significant pressure with consumer’s discretionary spending impacted by higher cost of living and customer acquisition costs higher than ever, retailers are understandably looking to cut costs and operate more efficiently. That’s why it is imperative to embrace an opportunity to use the post-purchase experience to simultaneously leverage profitability and drive cost savings, explains Daly.

“Leaders in the industry understand they need to strategically address the post purchase journey and optimise for cost at each step while continuing to deliver a seamless customer experience.”

If reducing overheads is not a sufficient incentive in itself for adopting a smart, automated returns process, customer expectations should be, Daly tells Inside Retail, referencing the company’s recently released Future of Commerce Report.

The average rate of customer retention in e-commerce is around 38 per cent. That means that just three out of 10 customers stick with one single brand for more than one year. According to the Future of Commerce Report, 49 per cent of customers who left a brand to which they’d been loyal during the past 12 months attribute their decision to a poor customer experience. 

The power of a seamless returns experience

Daly says 98 per cent of consumers say they would be more likely to return to shop with a retailer again if they receive a fast, convenient and hassle-free return experience. 

“A seamless returns experience is now a baseline expectation for customers,” explains Daly. “Merchants need to anticipate their customers’ expectations – offering options for pickup, drop off, boxless labeless returns – and identify ways to consolidate and reduce costs.”

Loop Returns is a leading post-purchase platform that optimises returns, post-purchase interactions, and reverse logistics for more than 3500 brands, representing about 15 per cent of Shopify’s gross merchandise value. The Shopify-backed company has more than 250 employees and oversees 2 million returns per month. 

As the leading returns platform, Loop Returns provides the data and insights brands need to understand their post-purchase experience and how their product is resonating with the market.

In tough times, returns can reduce expenses 

In today’s challenging economic times with pressure on retailers to maintain sales when many customers are working through a cost-of-living crisis, any means of reducing overheads is invaluable. 

Daly says proof that adopting a seamless, automated returns process can reduce operational costs is illustrated by the experience of Loop Returns’ merchant customers. During the past year, Loop Returns estimates its merchants who have switched from manual solutions have reduced costs by $8.8 million from customer experience time savings. 

A robust, efficient returns process can achieve more than delighting your customers and ensuring their loyalty: retailers can give their returned products a second chance at life which is great for the planet and your bottom line. However, delays in returns quickly become expensive for a retailer.

According to Loop Returns’ report Future of Commerce, only around 30 per cent of returns can typically be restocked. 

How speed can aid resale

“The speed of returns is crucial for brands in some verticals, like fast fashion or highly promotional products,” explains Daly, “because it affects the likelihood of reselling the product.

“For example, a summer dress can quickly go out of style in a couple of months. If it takes weeks to ship the item back, inspect it, process the return, and update the inventory count, you can miss the window for resale due to the product’s short lifecycle.”

The shipping and returns processes also offer retailers a real opportunity to elevate the customer experience, says Daly, who advises retailers to think strategically in customising the experience for different clients which helps maximise the return on investment. 

She advocates that retailers look for ways to integrate another shopping experience into the returns process – assuming a customer really wants to exchange goods – by offering incentives for additional orders.