Making Returns Sexy for E...

Making Returns Sexy for E-Commerce Retailers

Jun 30, 2023
  • Approximately 30% of returns occur due to incorrect sizing, especially in online purchases.

  • Simplifying the returns process can reduce refund requests, allowing businesses to maintain customer relationships while keeping refunds under 30-40% of returns.

  • Effectively managing returns involves understanding partners, overseeing operations, optimizing staffing, and addressing the complexities associated with the return process.

In the fast-paced world of e-commerce, where customers demand seamless experiences and effortless transactions, returns have often been regarded as a necessary evil—a dull and cumbersome process that retailers grudgingly accommodate. However, what if we told you that returns have the potential to be more than just a headache? What if we suggested that returns could be transformed into a captivating and even profitable endeavor?

In a session hosted by our event partner Manifest, the team had a chat with Jonathan Poma, CEO and Co-Founder of Loop; Rachelle Snyder, CEO and Co-Founder of Arrive; and Ryan Powell, Group Director, Marketing and Partnerships of Ryder System on the topic of returns. With many years of experience in the retail industry, the three experts shared insights on the influence of returns in the retail industry and also gave some advice to help retailers overcome potential challenges associated with returns management.

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Maximizing Returns as Valuable Opportunities in the Retail Industry

Returns are an inevitable and integral part of the customer life cycle, with approximately every four dollars spent online being reimbursed. According to Jonathan, simplifying the returns process can reduce refund requests, allowing businesses to maintain customer relationships while keeping refunds under 30-40% of returns.

Jonathan further explains that many merchants take calculated risks by making it easy for customers to complete their intended actions, understanding that 30% of returns occur due to incorrect sizing, especially in online purchases. By offering convenient options such as gift cards, refunds, and enhancing digital experiences, retailers can facilitate a seamless shopping journey. For example, Loop's first-mile procedure focuses on providing the best experience for customers, reducing return processing time, improving customer satisfaction, and expediting product delivery.

Within the retail industry, many companies tend to prioritize their core capabilities, such as marketing, product creation, and customer acquisition, often neglecting the untapped potential of returns. In actuality, these returns represent substantial opportunities worth millions of dollars. As such, Rachelle believes that it is crucial for modern retailers to gain a comprehensive understanding of their product flow, which encompasses both incoming and returned items.

For instance, customers frequently try on multiple sizes of a garment before settling on the right fit, potentially resulting in minor stains or imperfections. Rather than discarding these items outright, retailers have the chance to identify and refurbish them, ultimately reselling them under their own brand. By adopting such practices, retailers can optimize their revenue effectiveness and fine-tune their e-commerce strategies. Additionally, it is important for retailers to analyze item profitability and establish appropriate recycling or disposal methods for items that cannot be resold, ensuring sustainable and responsible practices.

Enhancing Retail Processes through Third-Party Logistics Solutions

While reverse logistics may not be the most glamorous aspect of the retail industry, it holds significant importance, says Ryan. Within Ryder System, numerous fashion brands face return rates ranging from 20 to 40 percent. It is essential for retailers to possess the capacity to handle these returns, scale their operations accordingly, and assess any potential damage and its nature. Such capabilities enable retailers to identify any problematic manufacturers or unfavorable actors in the supply chain. To prevent and address these return issues, merchants can focus on various areas of improvement.

By partnering with firms like Loop or Arrive, Ryder System ensures that brands gain a comprehensive understanding of the reasons behind returns, allowing them to take proactive measures. This collaborative approach empowers retailers to deliver the best products to their customers while establishing efficient and cost-effective processes on the other end of their business. Leveraging third-party logistics solutions proves invaluable in streamlining retail operations and optimizing customer satisfaction.

Leveraging Returns: Transforming Waste into Profitable Opportunities

To effectively tap into the potential of returns, Rachelle emphasizes the initial step of comprehending the revenue opportunities and addressing the underlying issues. Retailers often shy away from approaching returns, even when their focus lies heavily on profitability and problem-solving. However, by recognizing returns as a vital aspect of the business, retailers can prioritize margin optimization, enhance revenue efficiency, explore ethical sales channels, and fully grasp the benefits of such endeavors.

Responsible management of returning items becomes imperative for retailers aiming to attract new customers, establish sustainable practices, and align with the expanding retail landscape in the coming years. Capitalizing on the goods already present in their inventory, retailers can leverage returns as a means to generate additional revenue. By effectively reselling these items, retailers have the opportunity to maximize their profits and extract value from what would otherwise go to waste. Embracing returns as a revenue-generating strategy enables retailers to unlock untapped potential and drive financial success in the long run.

Rethinking Returns: Strategies and Solutions for Retailers During Peak Season

According to Rachelle, it is vital for businesses to develop a well-defined plan to handle returned goods since returns are an inherent aspect of the retail industry. Without a plan and the support of solutions like Loop, Ryder, or Arrive, the influx of returned products through your 3PL or operational channels can become overwhelming. As retailers primarily focus on their core competencies, progressing and expanding as a brand independently can be challenging. By forming partnerships with companies such as Arrive, Loop, and Ryder, retailers can advance their growth while prioritizing revenue efficiency and delivering outstanding customer experiences.

Meanwhile, Jonathan highlights that retailers should view holiday returns not as a major issue but as a valuable opportunity to attract new customers and nurture relationships with them. Jonathan notes that while return rates typically increase by 2 or 3% during the holiday season, refund rates decrease by approximately 8%. Despite retailers' concerns about holiday returns, the majority of returns occur due to gifting or sizing mismatches.

From Ryan's perspective, effectively managing returns involves understanding partners, overseeing operations, optimizing staffing, and addressing the complexities associated with the return process. Ryan recognizes that the first quarter of the year tends to be exceptionally busy, with a continuous influx of consumers seeking assistance. To tackle this challenge, it is crucial to have a well-prepared plan in place and collaborate with partners who can ensure success throughout the peak season.

It's Time to Embrace the Positive Potential of E-Commerce

There's no denying that e-commerce retailers have the chance to turn returns into a positive and advantageous aspect of their business. By reframing returns as an opportunity rather than a setback, retailers can enhance customer satisfaction, build trust, and drive revenue growth.

Moreover, retailers should seize the opportunity to understand the reasons behind returns, learn from customer feedback, and make improvements to their products and services. By embracing returns as an integral part of their e-commerce operations, retailers can create a seamless and engaging shopping experience that differentiates them from competitors and drives long-term success in the dynamic world of online retail.

About Manifest 2024

Manifest, February 5 - February 7, 2024 in Las Vegas, is the premiere gathering that unites the entire eco-system of Fortune 500 global supply chain executives, logistics service providers, innovators and investors at the forefront of logistics tech and end-to-end supply chain.

Join over 4,500 supply chain innovators to foster new strategies, forge valuable relationships and network with the best of the best. Find out more!

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