A woman processes returns at her workplace
Online Retailer Study 2022 Prevent returns and save money
“Powder blue”, “sage”, “Nile blue” or “taupe” are in vogue: Designers of clothing, furniture and accessories like to come up with trendy names for colours. But what may sound stylish can become a problem in online retail: consumers often picture something slightly different, and end up sending the goods back. The reasons given for most returns are “inaccurate descriptions” and simply not liking the product. Online retail is booming, the number of returns is rising.
The number of returns varies greatly depending on the product range or product group. The highest returns rate can be found in the fashion sector, where up to 60% of customers return the goods they have ordered. It’s very important to realize that, for retailers and the environment, returns are by no means cost-free. This makes it all the more important to ensure returns management processes are improved on a continuous basis. The goal of returns management is minimizing returns which means constantly scrutinizing the reasons for returns. Online retailers should ask themselves the following questions:
- Are certain products returned particularly frequently?
- Are the customers disappointed with the quality of the product, or was the description too vague?
- Did delivery take too long?
- Did the item not fit?
- Did the customer not like the item?
- Did the item not match the description?
- Was the item defective or damaged when delivered?
- Were several variants ordered to choose from?
- Does delivery take too long?
- Was the order incorrect?
- Was the item purchased for a cheaper price in another shop?
Return rates initially have a direct negative impact on revenue, as they mean reverse transactions for sales that have already gone through. At a return rate of 50, for example, initial net sales are subsequently reduced by exactly half. The impact on the profit margin is even worse.
Processing costs are incurred, for example, for transportation, processing, reintroduction of returns into the sales process and administration. The key cost drivers are quality control, including the identification, examination and inspection of returned items. Clothing in particular must be examined for signs of wear, electrical appliances for their functionality. But postage and shipping costs for returns aren’t negligible either.
Returns – an opportunity to improve
The best sort of return is therefore no return at all. But if returns are viewed as an opportunity, a company can at least improve its products and services in the long term. If we take a closer look, most reasons point to errors in retailer processes, in other words things that customers cannot influence.
Collect data for returns
Data helps to prevent returns. But far from all online shop operators ask about the reasons for them, which means they don’t have a solid foundation for reviewing processes. This data could in fact be used to identify why customers were not satisfied and what information they were lacking.
Write more detailed product descriptions
Manufacturer information must be crystal clear for customers: clothing colour descriptions should be in plain English, and size information more specific. “Taupe” becomes “light grey”, “nude beige” becomes "skin-coloured” and information such as “looks bigger” or “rather tight” can be helpful when ordering clothing. Although many efforts are already being made to avoid returns – particularly in the fashion sector – they are only successful in some cases. For example, the introduction of measuring techniques to determine the right size for clothing, virtual changing rooms and other technical measuring methods do not necessarily mean that people change their habits.
Nor have significantly improved product photos and descriptions, zoom views and videos yet proven able to produce a sustained reduction in the return rates of many online shops. This is not necessarily because users don’t accept them, but rather because they are used to ordering several items to choose from and seeing their home as the changing room.
On top of that, the problems faced by most online shops start much earlier, especially when it comes to fashionable clothing. For example, despite the many efforts that have been made, there are still no standards for tables of sizes that have become uniformly accepted on the market. Almost all suppliers work with their own sizes – so-called “vanity sizing” – where the sizes given are often deliberately smaller.
A picture paints a thousand words
Customers want more images, detailed photographs or pictures of the products from all angles to be able to judge the goods properly. Explanatory videos are a good addition when presenting devices and appliances, replacement parts/functions and materials. In addition, new technologies such as augmented reality can also give a vivid impression of the product, for example by making it easier to assess proportions or providing support with setting up or the handling of spare parts. Similarly, configurators or virtual rooms for trying things on can help people choose glasses and clothing. Finally, informed customer service helps to avoid returns: customers do not want products they don’t understand, leading many people to ask about functions and sizes by e-mail, on the phone or through a messenger service. If they don’t get an answer, they tend to return the product. Social commerce offers further advantages. Products are explained and presented in an attractive way and moderators may be able to respond to questions in integrated live chats.
Further helpful measures designed to prevent returns can be found in our current Online Retailer Study 2022 with a focus on returns.
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