Your customer made a purchase, but now they want to return it. How do you keep them happy while protecting your bottom line? By making reverse logistics integral to your retail strategy. With total merchandise returns accounting for $351 billion in lost sales for U.S. retailers, and around 68 percent of customers reviewing a return policy before making a purchase, the stakes are high. But customer returns also represent a unique opportunity, with retailers increasingly finding ways to convert product returns into sales.
According to Dave Hudson, project director in the Global Retail and E-commerce Strategy Group at UPS, “An easy returns process is table stakes. If you don’t have it, you’re starting at a disadvantage.” Why? It comes down to a couple of different factors, one of which is consumer behavior. Customers want returns to be easy and—perhaps more importantly—they want them to be free. Hudson puts it like this: “Consumers already have high expectations that need to be met by retailers, and, if anything, we see those expectations increasing in the future.”
It’s also important to remember that return solutions aren’t only important during the post-purchase experience. “Most consumers look at returns policies before they buy, making it part of the pre-sale process as well. It’s a primary buying criterion,” says Hudson. Illustrating this point, the UPS Pulse of the Online Shopper™ survey revealed that 79 percent of online shoppers consider free shipping on product returns to be an important factor when selecting an online retailer. Returns aren’t just about customer retention—they’re also about customer acquisition.
Of course, there’s also the financial impact. Product returns can be a lengthy, costly process that many merchants see as a cost-center. And perhaps with good reason. “We estimate most merchants are getting roughly 10 cents on the dollar for returned goods,” says Hudson. In fact, he estimates that the market share on transportation to support reverse logistics alone is up to $16 billion. That’s waste, pure and simple. But importantly, it’s waste that’s relatively easy to eliminate.
Optoro—a company with which UPS has formed a strategic alliance—offers a technology solution that helps retailers reduce operating costs and increase profitability around the returns process. Hudson explains, “Optoro’s cloud-based solution is powered by a smart algorithm designed to continuously learn and help merchants find the best home for a returned good, and at the greatest value.” It helps retailers decide whether returned products should go back on sale, be sold on a secondary marketplace, or returned to the vendor for a refund, making it an effective way of tapping into the value of your business’s hidden assets, namely, returned and excess inventory.
One of the key ways to reduce the financial impact of returns is by converting them into sales. These four steps can help you optimize your reverse logistics program, and boost sales in the process:
1. Optimize your in-store returns process
According to the UPS Pulse of the Online Shopper survey, 66 percent of customers who make an in-store return go on to make further purchases. But unless you’re willing to offer an easy return process, they simply won’t be coming back. There are many different strategies you can use to create a streamlined in-store returns experience for your customers, including discounts and loyalty cards for customers who make a product return.
But that’s not the only way to boost sales. Robert Brooks, senior manager in the Global Retail and E-commerce Strategy Group at UPS, notes, “In the past, in-store returns were positioned in the back of the store, but consumers were not satisfied. As these return locations are moving to the front of the store, retailers are trying to motivate customers to come into the store and purchase additional products at the time of the return.” Encouraging shoppers to browse for an exchange rather than returning the item can be an effective way to convert a product return into a sale.
2. Offer store credit, as well as refunds
Providing your customers with store credit or discount codes as a refund option for a product return can encourage them to shop at your store in the future. However, it’s also important to provide a cash-only option as well. “Consumers want their money back, and they want it back fast,” says Hudson. Research from Optoro confirms this, with the ability to get a full refund on an item, rather than an in-store credit or partial refund, considered to be the most important characteristic in a returns policy by 35 percent of customers. By only offering store credit, you’re taking away the one thing customers value above all else: flexibility.
3. Suggest a similar product for exchange during returns
When it comes to e-commerce returns, suggesting an alternative product can be a fantastic way of encouraging new sales. And although you would mostly associate like-product replacements with in-store returns, it’s just as effective online or in a confirmation email. “If the consumer is looking for a different size or color, that’s a great opportunity for the store associate to head out to the floor and retrieve that item. But this can also be done online. There’s an opportunity to recommend like-products, and also take the opportunity to drive an additional sale,” explains Brooks.
4. Simplify the returns process
Making the returns process simple and transparent is fundamentally important, giving customers the confidence and security to make further purchases from your business. This is something UPS may be able to assist with. According to Hudson, “We have the assets at UPS to really put together a full-platform reverse logistics solution that solves problems for consumers and merchants alike.”
On the consumer side, UPS solutions like mobile returns make it simpler to provide an easy returns process for your customers. “Merchants can offer a UPS Returns® electronic label. Customers are given a mobile code, which they can take to any The UPS Store® location to have printed. This creates the flexibility for consumers to return an item and makes it a lot easier for them to have the simple return experience,” says Brooks.
In addition, there are numerous returns solutions that can empower retailers throughout the returns process. For example, UPS Returns Manager can give shippers control over their returns process, offering visibility into shipping and providing insights into why certain products are being returned. Enabling you to make informed decisions about your products is another way returns can be leveraged to boost sales.
By optimizing in-store returns, streamlining reverse logistics, and offering multiple options for refunds, you can create opportunities to transform returns into sales. And with 55 percent of customers having decided not to buy an item solely because the return policy wasn’t flexible enough in the last year alone, easy returns are becoming an increasingly fundamental element of e-commerce.
Want to improve your e-commerce returns process? Explore some of the UPS Returns® solutions that can help your business turn your returns process into a competitive advantage.
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