What would happen if the retail industry changed the way it viewed returns?

Could it be possible that returns can be seen as an opportunity for building customer lifetime value, rather than a cost to the business?

With the transition from bricks & mortar to online, and now with the added impact of CV-19, retail returns can be a stressful process – for both retailer and customer!

During a recent Hive Cafe session our members came together to discuss the benefits and challenges – for some retailers, returns are still responsible for causing friction in the customer journey, whilst others are already catching on to the opportunity returns bring to engage with customers and are seeing an uplift in sales as a result.

Before the global pandemic, retailers were all monitoring their returns and returns policies. But post-pandemic, consumer behaviour has changed. US consumers have shifted their shopping habits online, even faster than anticipated. However, whilst 88% of US consumers will choose to continue to browse online, 40% will hold back from purchasing due to complicated returns process.

So what strategies are Retail Hive Members using to turn returns into an opportunity?

Many major retailers utilise a tool which helps their apparel customers to make more informed choices at purchase by giving a true reflection of clothing sizes, reducing the tendency by customers to buy more than one size and return those that don’t fit. One member reported a 2.3% decrease in returns this year since launching this application.

Another member, a cosmetic brand, has seen return rates drop by 30% in last 4 months, whilst sales have increased 44%, by utilising a flexible returns policy, enabling customers to buy more but also keep more.

As customers are taking longer to return their unwanted items, due to hesitancy to go back in store, some retailers have seen this as an opportunity to test out new solutions. By operating more return locations, one member has extended their policy to allow their customers to return their products at the grocery store whilst doing their weekly shop; making it as seamless as possible for customers and reducing friction from the customer journey.

Some members are utilising a centralised service experience desk or relationships centre, where customers can return unwanted goods, collect online purchase and even get items tailored. These spaces are well signposted and easy to locate, child friendly and also allow an opportunity for the sales associates to engage the customer which offers them added value.

Centres such as these help immensely with the returns process as they allow the retailer to get their hands on the returned goods and process them quickly so that they can be ready for sale once again.

Once member shared how they’re working to a 4-hour time window, whereby the goods are taken back, reviewed, checked for damage – such as lipstick on the collar – and then put back into inventory and onto the shelves. This enables products to be re-sold and sent out of the store on same day.

Exchanges vs. returns: what does the customer want?

Whilst some retailers are working with third party partners to try to encourage customers to exchange an item rather than return it, is that what the customer actually wants? What affect might this have on customer lifetime value? Will they come back?

By trying to sell a customer into doing something they doesn’t want to do, retailers are risking the bond with the brand becoming muddied. Some customers may see this as friction within the returns policy which could affect their likelihood of purchasing again. Even if an exchange is offered as an alternative to a return, if the customer really wants to return a product, they will – most likely to a different store.

Advice from the group was that retailers need to be open to returns to favour the relationship. Returns are a huge opportunity to get new customers to engage – by shifting away from the mindset that returns are hurting the business, retailers can find that giving the customer exactly what they want will provide an opportunity to learn and grow. After all, returned products can be resold, enabling the retailer not only to maintain their relationship with the original customer, but also to gain a new one!

Commission: turning awkwardness into opportunity

Focus group results have shown an overwhelming preference of customers  to return products to a different store out of embarrassment for the sales associate whose commission will be withdrawn due to return. This is yet another opportunity to engage the customer and nurture the customer relationship with the brand. Retailers that make sure their customers feel comfortable with returning purchases before actually purchasing them are creating a window of opportunity to re-engage and up-sell to customers. These customers will return to the store more frequently and ultimately spend more in the long run.

When it comes to returns, the most important point to remember is to have a conversation with the customer. If they are visiting a retailer’s website to make a purchase, there’s already an interest in the brand. If they are returning a product, it’s likely because they made a mistake in choosing the product. If sales associate or customer services agents speak to them, they can figure out where the error lies and act as a brand advisor; directing them in the right way to make an exchange rather than return.

At the end of the day, it is the customer who is in control. Retailers today have little choice but to be flexible to accommodate the customer’s ever changing needs – and if this means allowing items that have already been worn to be returned, or proving a longer returns windows, the customer will remember and reward the retailers that made the process smooth for them (and snub those who didn’t!)

There have been so many rules around returns for a long time, and those days are over. The customer is in control today, and we need to resolve to say yes to everything!”

VP of Stores, Intermix