Making the Most of Returns Management in Ecommerce

2020 has seen a surge in ecommerce adoption, making returns management a high priority for rapidly growing merchants.

As ecommerce has expanded over the last ten years, and with the recent push toward online shopping, businesses have been forced to quickly react to the 15% to 30% of products sold coming back as returns.

This means there are a lot of questions and a lot of unknowns. And as a result, there are a lot of common mistakes in returns management that we wish to clarify.

1. Isolating Returns from the Business

Too often, we see that returns are not incorporated into ecommerce businesses.

In these cases, returns are delegated to the operations team, siloed from the CRM strategy, product teams, and marketing, and don’t feed into other aspects of the business.

But with typical return rates hovering between 15% and 30% in ecommerce, returns are absolutely a part of business.

And as we will explore, returns can inform product-related decisions, shape the customer relationship, and can drive powerful business outcomes.

2. Viewing Returns as “Us vs. the Customer”

No one likes returns. Not retailers, and definitely not customers.

According to a survey by UPS, 73% of consumers indicated that the returns experience would impact whether or not they continue shopping with a retailer.

Given that ecommerce return rates often fall between 15% and 30%, a reasonable proportion of your shoppers (especially first-time shoppers) are subject to a very delicate experience in the customer journey.

The same customer experience you aim to create in other aspects of your business should be reflected in how you manage returns.

In particular, this should inform how you craft your return policy.

Your return policy has a pronounced impact on the customer relationship, and it is a direct indication of how you view returns in your business.

Return policies exist on a spectrum ranging from customer-centric to immediately profit-driven.

If your primary focus in the returns experience is to sustain the customer relationship, you should implement a lenient, customer-friendly return policy.

But if your focus is to maximize immediate profitability through minimal costs and maximal recovery value, you may lean toward a more strict return policy.

3. Over-Prioritizing Exchanges

Of course, exchanges are important. Exchanges keep cash in your business, and help customers get the products that are right for them.

As a result, many retailers want to drive more exchanges and less refunds.

But exchanges do not solve everything.

The type of return, such as an exchange, tells you nothing about why the product is being returned. Return types in no way help to reduce your return rate in the future.

Return reasons, on the other hand, can reveal product-related issues, and reflect the current impression of customers.

In addition, refunds outnumber exchanges for many ecommerce brands. If a customer wants a refund, you should make it easy and frictionless for her to get a refund.

The key, in this case, is to inspire customer retention after refunds.

It’s widely stated that exchanges are more valuable to retailers than refunds.

But can a long-term impact be proven?

The smarter goal is to maximize customer lifetime value through repurchases. You can leverage returns data for more intelligent customer segmentation and messaging.

Provide the return experience that the shopper wants, remove points of friction, and optimize the path the repurchase.

4. Not Recording Product Dispositions

Product dispositions reflect the condition of returned products when received by the retailer, and should directly influence whether the products are restocked, prepped for resale, liquidated, or otherwise discarded.

Product dispositions may be the most under-recorded information related to returns. 

Why bother record dispositions? If a returned product is damaged, marking it as damaged won’t help recover any value on the item.

That’s right. But it can help you recover value on future returned products.

If you notice that products returned for reasons such as “Defective” or “Damaged” tend to be recorded as damaged by your team, you can reroute them to avoid unnecessary work.

And if you want to combat returns fraud, product dispositions are going to be a key data point.

5. Not Leveraging Returns Data

Most likely, data is not the first thing that comes to mind when you think of returns.

But a core belief of ReturnLogic is that returns are not just a logistical problem, they’re a data problem. That is the basis of returns data.

Returns data allows you to investigate the causes of returns, reduce your return rate, optimize repurchase behavior, and capitalize on your customer lifetime value.

To fully understand the value of your customers, products, and business as a whole, you need to integrate returns data into the equation.

Otherwise, we’re only seeing half of the picture.