Returns in the retail industry have always posed a challenge. A report from Statista estimated 2020 return delivery costs at $550 million, up 64% since 2017. Those are just costs incurred by the purchaser, which do not include the processing, restocking and reselling costs incurred by the seller.
The rise of ecommerce as a percentage of overall retail sales is a major factor in the increasing rate of returns, which by some estimates account for roughly 10% of in-store purchases but 40% of online purchases. In addition, the past decade has seen returns baked into the business model of several direct-to-consumer starts-ups, including Warby Parker, Stitch Fix and Zappos. Traditional retailers must now contend with a rising expectation from consumers that returns are a normal part of doing business.
In the 2020 State of Returns study from Narvar conducted in September 2020, research shows how conditioned customers are to returns as normal operating procedure — especially with contactless engagement being the new norm. In the report, 60% of consumers said they “bracket” their purchases — purposefully buying a product in multiple sizes, colors, etc., with the intent to return all but one. This number represents a 50% increase in three years.
Not surprisingly, with returns quickly becoming a routine component of online shopping, consumers also expect the process to run smoothly. Pre-paid return labels, multiple drop-off locations, included return packaging, easy-to-follow instructions and loosened restrictions are all expected amenities.
According to the Narvar research, a positive returns experience is a retention imperative. In the survey, 76% of first-time customers who had an easy/very easy returns experience said they would shop with the retailer again, while 33% of repeat customers who had a difficult/very difficult experience said they would not do business with the same retailer. Digging deeper, customers defined “very easy” returns as those with convenient drop-off locations, prompt refunds and prompt notifications about the status of a return. Overall, convenience and communication were cited as top reasons for continuing to shop with a brand.
Strive for a Holistic Customer Experience
As consumers change, returns are increasingly a key part of a holistic, personalized and omnichannel customer experience. Done well, these touch points will drive higher revenue and retention.
To pull this off successfully, there can be no silos of data, people, channels or processes. Rather, there must be a single view of the customer that pulls in customer data from every source, in real time, and is made instantly accessible to marketers and frontline staff as a unified customer profile — a golden record — that tells the marketer everything there is to know about a customer.
A golden record powers a personalized, omnichannel customer experience. By incorporating an end-to-end returns process into a customer golden record, which includes all devices, emails, addresses and every other customer identifier across an unknown to known customer journey, a brand is able to deliver a contextually relevant message, offer or action that is consistently in the cadence of a unique customer journey.
For instance, if a customer starts an online return and places a call to a call center, the responding agent with instant access to a real-time golden record will know everything there is to know — not just about the transaction, but also the customer’s behaviors and preferences — and will be primed to deliver a next-best action that will guide the customer journey to the optimal result.
Another example could be a customer placing an item in an online shopping cart that is similar to a recent in-store purchase, differing only in size or color. A brand with an accessible single customer view might then proactively send a notification to the customer, offering to start a return for the original purchase, or to offer a discount to match an in-store promotion.
Automated machine learning and a real-time decisioning engine are generally needed to produce a next-best action at scale for thousands of customers (or more) at one time. Fleets of online, code-free models programmed to deliver a specific outcome can determine — for each customer based on a specific point of time in a customer journey — a next-best action that is hyper-personalized and relevant for that exact moment in time.
Conversely, it is easy to see how a brand that lacks a single customer view may inadvertently introduce friction into a customer journey, which the Narvar study reveals as a surefire way to lose a satisfied customer. When data is siloed by channels of engagement or by processes, there are no guardrails in place to prevent a brand from, say, showing a website visitor an image of the exact product that they just returned. Or even recommending the identical product that is being returned rather than the product the customer may prefer — information that a golden record, combined with automated machine learning, will reveal.
Taking the prevailing mindset of returns simply being a cost of doing business is outdated and incongruous with delivering a holistic, personalized customer experience that drives revenue. With the right technology, people and processes in place, data-driven retailers can overcome traditional returns challenges, while also using returns as an opportunity to present a customer with a positive customer experience — providing the customer with an additional reason to keep coming back.
John Nash has spent his career helping businesses grow revenue through the application of advanced technologies, analytics and business model innovations. As Chief Marketing and Strategy Officer at Redpoint Global, Nash is responsible for developing new markets, launching new solutions, building brand awareness, generating pipeline growth and advancing thought leadership.