[Disclaimer] This content originated as a speaking at session at RILA Link.
The Impact of Returns on Customer Loyalty and Retention
How do customer returns influence long-term customer loyalty?
The returns process is a critical touchpoint that can significantly affect a customer’s perception of a retailer. A positive returns experience can foster loyalty, while a negative one can drive customers away. In fact, 84% of shoppers choose one retailer over another based solely on the returns policy.
To cultivate loyalty through returns, retailers should prioritize:
By offering convenient and customer-friendly return options, retailers can build trust and encourage repeat purchases.
Balancing Convenience and Preventing Returns Abuse
How can retailers balance easy returns with preventing unnecessary or excessive returns?
While offering easy returns is essential for customer satisfaction, retailers must also guard against practices like bracketing (purchasing multiple sizes or colors with the intent of returning unwanted items) and wardrobing (returning used items). In 2024, fraudulent returns accounted for 15% of all returns, costing retailers approximately $130 billion.
To strike the right balance, retailers can leverage returns technology and machine learning tools to differentiate between loyal customers and those with problematic return patterns. Retailers can then tailor their returns policies, offering benefits like returnless refunds to trusted customers while implementing fees or stricter policies for those with a history of abuse.
“When it comes to returns, retailers really need the mindset to ‘personalize don’t penalize.’ Not all shoppers are bad actors, and you don’t want restrictive policies to deter people from your brand. That’s where segmentation and personalization within an RMS comes into play”.
Amena Ali // CEO of Optoro
Learn more about Returns Fraud & Abuse
Leveraging Returns Data to Improve Customer Experience
What are the best practices for using returns data to improve the customer experience and prevent future returns?
Returns data is a valuable resource that can provide actionable insights for improving the customer experience and reducing future returns. By analyzing return reasons, retailers can identify patterns and address underlying issues. For example, if products are frequently returned due to inaccurate descriptions or sizing issues, retailers can refine product listings to set clearer expectations.
Key metrics to track include:
By monitoring and analyzing these metrics, retailers can gain a deeper understanding of their returns process and identify opportunities for improvement.
Managing Costs and Optimizing the Supply Chain
What are the key cost drivers associated with customer returns, and how do returns affect supply chain efficiency?
Returns can significantly impact a retailer’s bottom line, with costs encompassing logistics, restocking, inspections, and disposition. According to the RILA Link Returns Panel, returns cost retailers approximately $30 per $100 of merchandise sold. Additionally, returns can tie up inventory, slow operations, and increase costs, disrupting supply chain efficiency.
“Retailers need to think about positioning their returns to achieve the next best outcome,” says Kristin Bauer, Chief Supply Chain Officer at Foot Locker. “What decision will minimize my markdown exposure? Or optimize my supply chain costs?”
To mitigate these issues, retailers can implement strategies such as:
Technology, Sustainability, and the Future of Returns
How are technology and sustainability shaping the future of returns?
Technological advancements are revolutionizing the returns process, with AI-driven solutions automating the routing of returns, optimizing recovery, and reducing environmental impact. Retailers are also increasingly embracing sustainability by diverting returns from landfills and exploring secondary channels like recommerce, donation, and liquidation. According to the RILA Link Returns Panel, 86% of retailers report having sustainability strategies in place.
By integrating technology and sustainability into their returns processes, retailers can enhance efficiency, reduce costs, and appeal to environmentally conscious consumers.
Reducing Returns Before Purchase
What can retailers do to reduce the likelihood of returns before a customer even makes a purchase?
Proactive measures can significantly reduce return rates. These include:
Conclusion
Effectively managing returns is essential for retailers looking to thrive in today’s competitive market. By prioritizing customer loyalty, balancing convenience with fraud prevention, leveraging returns data, optimizing the supply chain, and embracing technology and sustainability, retailers can transform returns from a challenge into an opportunity for growth and success.