Many Happy Retail Returns
Retailers have many reasons to rejoice this holiday season. Shoppers are returning to the stores in droves and spending is expected to climb. Experts are forecasting an increase of anywhere from 7% to 10.5% over 2020, a jump of historical proportions considering the past five years it averaged 4.4%. However, with the increase in sales comes an increase in retail returns. Last year, returned merchandise accounted for just over 10% of total sales, or $428 billion. That means stores need to focus on return policies to handle the post-holiday influx much more than in the past.
Luckily, retail returns provide stores a chance to flex their customer service muscles and turn disappointed shoppers into happy, loyal customers.
Returns on the rise
The rise in merchandise returned to stores can be closely traced to the increase in e-commerce and the huge jump it took during the pandemic. Many brick-and-mortar retailers added e-commerce shopping options to keep the cash registers ringing while their doors were closed. Online spending increased over 32% in 2020 in the United States which accounted for 14% of total sales.
While that spending was a boon to retailers struggling to stay afloat during the pandemic closures, returns of e-commerce items more than doubled from 2019 and were a major driver of overall retail returns.
“Last year, we saw an increase in returns of online purchases as the pandemic forced more consumers to shop online,” said Mark Mathews, NRF’s vice president of research development and industry analysis. “Retailers view the return process as an opportunity to further engage with customers, as it provides additional points of contact for retailers to enhance the overall consumer experience.”
Return fraud complicates the explosive increase in the number of retail returns. Last year, approximately 7.5% of the returns were fraudulent to the tune of $102 billion.
Bad online shopping behavior
Free shipping, especially free return shipping, offered by Amazon and other e-commerce giants is partly responsible for the exponential growth of retail returns.
It has also led to some bad online shopping behavior such as bracketing purchases. That’s when customers buy two or three sizes of the same product to make sure they get something that fits. Then they return the items they don’t want.
A survey from Navar, a direct-to-consumer customer experience platform, found that more than 60% of shoppers are bracketing online purchases knowing they will return most of the purchases. The study shows that practice has increased 50% over three years.
Average return rates vary by category, but apparel typically has the highest rates with 30 to 40 percent returned.
“Shoppers return 5 to 10% of what they purchase in stores, but 15 to 40% of what they buy online,” David Sobie, co-founder and CEO of Happy Returns tells CNBC.
More learned behavior
During the pandemic, many businesses adopted programs like click-and-collect, buy online, pickup in-store (BOPIS) and buy online, return in-store (BORIS) to remain operational. These programs combine online purchases and at-location pickup.
While these programs successfully kept many businesses running, they also opened them up to new kinds of return fraud. The retail industry loses about $24 billion annually to return fraud.
Returns are a good thing
While taking merchandise returns isn’t exactly the objective of retail sales, they aren’t the worst thing for a business. Retail returns provide stores a chance to show off their customer service skills and are ways to get to know their shoppers better.
- The most loyal customers often make the most returns. Makes sense, right? They buy the most products, so they’re going to purchase the wrong size, color, or product once in a while. Having a fast and friendly return process is going to keep them happy. As the age-old retail axiom goes: It costs five times as much to win a new customer as it does to retain a good one.
- Retail returns can be managed and mitigated. It doesn’t take a lot of planning to develop a fast and fair return policy that can easily be communicated to retail staff. If it’s managed through a comprehensive POS system, the purchases, the merchandise and the customer can all be tracked.
- Returns are an opportunity to turn occasional shoppers into loyal customers. Whether sales are made in-store or online, retail returns give merchants a chance to develop a relationship with the customers. It provides an opportunity to gather information about the shopper which can be used to cultivate more business for rewards programs or special offers.
- Returns create opportunities to upsell or make additional sales. The Connected Shoppers Report from Salesforce shows that 67% of customers admit they bought another item while returning a product. Those peripheral sales are largely dependent on a customer-friendly return policy.
Customer Return Policies
Every store should develop a return policy before it sells a single item because roughly 10% of everything sold will be returned.
“We recommend retailers keep their return policies as simple and seamless as possible to earn customer goodwill, rather than making them difficult in the hope of preventing some returns,” Sridhar said. “The long-term customer goodwill earned is likely to easily offset any short-term gains by preventing returns.”
A store’s return policy needs to be clear, easy to understand by both customers and staff, and effectively communicated.
The effectively communicated portion of the solution is simple. It needs to be posted at every checkout counter and, with the help of a point-of-sale provider, printed on every receipt. Putting it on receipts automatically eliminates potential conflicts.
There are a few basic rules that stores can incorporate in their retail return policies.
Receipts are key
Stores must first decide whether or not receipts are required for retail returns. Receipts prove where merchandise was purchased and allow a store to accurately track its merchandise and transactions. Two rules of thumb about receipts are:
- No returns or exchanges without receipts.
- Returns without receipts are accepted, but only for store credit.
The National Retail Federation suggests stores require a receipt for a refund to defend themselves against fraud. An NRF survey found that 10% of returns are made without receipts and 10% of those were fraudulent returns.
Identification builds customer relations
Many businesses require customers to have some form of identification when they return products. A driver’s license or state-issued ID card are examples. For stores operating on point-of-sale systems, this allows them to identify customers who return products often. It also:
- Protects against return fraud.
- Allows stores to collect information about their customers.
- Helps stores identify regular shoppers, which can lead to a better relationship with their customers.
- Helps stores streamline their return policies which makes them more customer friendly.
“With a POS system, the cool thing is you don’t have to have a receipt to get a refund. If a customer is in your system, all their sales history is recorded. If a customer isn’t in your system, you ask for a driver’s license, scan it and, boom, they’re in your system and you have a relationship with them,” explains Charles Owen, chief experience officer (CXO) with Paladin Data Corporation, a leading provider of retail point of sale systems. “You want to make returns as stress-free as possible for the consumer. That’s the kind of experience you want your stores to have with consumers. You give them that personal touch. You want to have that personal relationship with them.”
Many stores, especially during the holidays, add a time limit to their return policy. Returns of online purchases during the 2020 holidays increased 41% over the previous year, so requiring products to be returned with 14, 30, 60, or 90 days can help stores maintain some level of sanity in their inventory management and bookkeeping.
How stores provide refunds can vary depending on whether or not a customer has a receipt. They can be:
- An even exchange – returning the wrong item or a defective item for a new one
- A cash refund
- A refund on a credit or debit card purchase
- A refund for store credit
The fewer restrictions, the better the policy. However, the return of discounted items, close-outs, or in-stock merchandise should be clearly spelled out in the retail return policy.
The way a store handles its retail returns is a direct reflection of its customer service. A customer-friendly policy is going to result in more happy customers and more business.