Prevent returns and save money

Woman with notepad at work

Woman with notepad at work

Logistics Prevent returns and save money

Published on 10.03.2022 by Markus Peter,  lecturer in online retail and online retail logistics at various universities of applied sciences 

A key figure that is used a lot in business management is the returns rate. Returns are orders that customers ultimately send back to online shops. These goods could either be used or unused.

Designers of clothing, furniture and accessories like to come up with buzzwords for colours such as powder blue, sage or nude. What may sound stylish can become a problem in online retail: consumers often picture something different, and end up sending the goods back. The reasons given for most returns are “inaccurate descriptions” and simply not liking the product.

The highest returns rate can be found in the fashion sector. The costs are huge, not to mention the environmental consequences.

It’s very important to realize that, for online 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 as few returns as possible, which means always questioning the reasons for returns:

  • Are certain products returned particularly frequently?
  • Are the customers disappointed with the quality of the product, or was the description too vague?
  • Are products damaged when they’re delivered?
  • Did delivery take too long?
  • Customer did not like the item/the item did not match the description
  • Item was defective or damaged when delivered
  • Multiple items ordered
  • Delivery time was too long
  • Incorrect order
  • Item was purchased for a cheaper price in another shop, and so on.

Firstly, return rates have a direct negative impact on revenue seeing as they mean reverse transactions for sales that have already gone through.

Processing costs are, for instance, incurred for transportation, processing, the 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. In addition to this, processing, cleaning and repairs also jack up the costs.

Returns – an opportunity to improve

The best sort of return is 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 the customer cannot influence.

If you don’t ask, you’ll never know

Data can be really helpful in preventing returns. Yet by no means do all online shop operators ask why customers return things.

Write more detailed product descriptions

Manufacturer information must be crystal clear for customers: clothing colour descriptions should be in plain English, and size information should be more specific. Avoiding “vanity sizing” is a very good idea.

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.

Faster and faster

Excessive delivery times are a clear mandate for retailers to improve internal storage and delivery operations. If delivery takes over three days, customers will often shop elsewhere. If an item is not available, make the customer aware, and be sure to do so before they place the order.

Attractive packaging, attracted customers

Secure packaging can also reduce the returns rate, especially for fragile goods. Successful shops don’t just look at secure packaging, they also select packaging that looks and feels good because this can help draw customers in.

Reward customers who rarely return products

Discounts, vouchers and rewards can help to prevent customers from returning items, whilst it also incentivizes them to shop with you again. If you have a systematic approach to rewards, you can effectively train your customers to return items as rarely as possible, who then enjoy shopping benefits in the process.

Do payment methods have an impact on returns?

They do indeed. Buyers may, for instance, agree to make a prepayment if this is discounted, and will return fewer items since the reverse payment process is more complicated than a purchase on account. However, it is important to bear in mind that “prepayment” as a payment method may come with the longest delivery time. This is simply because these transfers usually come with a time lag, whereas credit card payments are practically done in “real time”.

Free returns: opinion is divided

For many larger suppliers, free returns represent a strategic, competitive advantage that pays off economically. Of course, these companies always factor in the cost of such returns.

How shipment is the most emotive part of the customer journey

Many online retailers forget from time to time that the shopping experience of their customers does not come to an end as soon as they click the checkout button. In fact, the shipment phase is one of the most emotive, important parts of the customer journey, and it’s not uncommon for it to be the deciding factor in online retail. This is precisely where many online retailers make a critical mistake. They stop interacting with their customers, and leave customer communication in its entirety to the shipping service provider.

As a general rule, it’s important that online shop operators recognize how important the shipping phase is to having the best possible shopping experience. Quite often this phase will determine whether a customer returns an item, or they go on to place another order with the shop in the future.

Process optimization is always important, and is something online shop operators need to routinely look at. It’s often also a good idea to get external insights. This saves you from developing tunnel vision.

 

Markus Peter, Post CH Ltd


Lecturer in online retail and online retail logistics at various universities of applied sciences.

Portrait Markus Peter

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