Why is The eCommerce Return Policy So Important?
The clear and generous return policy of your eCommerce store plays a big role in your customer’s shopping experience. Returns, however, are one of the biggest downsides to eCommerce businesses, since the costs can quickly mount. For instance, compared to offline stores, eCommerce retailers see 3x the volume in returns. Nevertheless, free shipping on returns has become the norm these days. 79% of shoppers have said that they want free return shipping. Not offering an easy and shopper-friendly return policy can affect user retention and repeat purchases.
Therefore, your return policy can directly affect consumer loyalty. There has been a shift in the return policies of many retailers over the past year. Many eCommerce brands are pushing back return dates due to the pandemic’s shipping delays.
Of course, only half of all online retailers currently offer free return shipping. This means having a generous policy could give you a competitive advantage.
eCommerce Returns in Numbers
How big are the returns?
Online returns are most common in the fashion industry, followed by health and beauty products. While returns are only about 8% in stores, online returns are over 25%. More than 30% of shoppers intentionally overbuy and return items they don’t need. In addition, 19% admitted to ordering multiple versions of the same product to be able to choose when the items arrive.
What is the impact of returns on the bottom line?
According to statistics on eCommerce returns, 2021 was a tough year for online retailers due to increased product returns. There was still a strong influence of the Coronavirus pandemic that year, so people were more likely to buy goods online. Therefore, many of those items were returned. The cost of eCommerce returns to retailers in 2021 was $218 billion
How important is a free return policy for consumers?
Statistics on eCommerce return policies indicate that nearly 60% of online shoppers want a no-hassle return policy. Essentially, customers can return the product for a full refund if they are not satisfied with it. Consumers interviewed by Klarna said an unpleasant return experience would make them avoid a retailer.
eCommerce Return Policy: Europe vs. US
In most cases in Europe, you can cancel a contract when you shop online, place an order over the phone or sign an agreement off-premises. It is possible thanks to the 14-day right of withdrawal across the EU.
In other words, you can return the purchased goods and get a refund without giving any reasons. However, the right of withdrawal does not apply to travel, event tickets, digital content, or custom-made products.
If you withdraw from the purchase, you will be responsible for the return shipping. A vendor is responsible for returning shipping costs if they did not inform you of them.
The U.S., however, does not have federal laws governing returns and refunds. Though, a number of states have adopted these laws regarding refunds and returns. Several of these policies cover hotel reservations, campsite reservations, and digital products. Others ensure the policy is easily visible on the store or website.
How eCommerce Returns Affect The Environment
The impact of returns undoubtedly affects the environment. Practices to ensure hygiene in various industries end up causing significant waste. E.g., beauty returns are rarely resold, regardless of whether they have been used or opened. Instead, they are discarded due to health and safety concerns or unsellable stock.
Depending on their condition, clothing and other goods can be returned to stores for resale. However, they can also be sent to discount stores or outlets. Sometimes they are donated to charity. Or in the worst-case scenario, they are dumped in landfills (also referred to as reverse logistics).
The impact of producing those products, alone, cannot even be considered. In addition to using materials, machinery, and labor, they emit greenhouse gases during the manufacturing process. A return’s environmental impact is devastating.
With the high cost of returns and the environmental impact, retailers have many reasons not to offer free returns. However, to stay competitive and earn customer loyalty from online shoppers, they also need to offer them. This creates a strategic dilemma.
Impact of Russian-Ukraine Conflict On eCommerce Supply Chain
Many businesses and highly regarded employees were forced into bankruptcy after the pandemic broke out. Just as digital transformation was enabling businesses to recover, the conflict in Europe began. As a result of the Russia-Ukraine conflict, the global economy has once again suffered a major blow.
The conflict had a huge impact on many industries, including Food and Agriculture, Construction and Heavy Equipment, Metals, Cosmetics, eLearning, Fashion, Electronics, and more.
During the pandemic, although production halted, the world didn’t experience the same level of inflation. Since the war, there has been a rise in the prices of crude oil, metals, and food crops. Thus, these hikes have repercussions such as inflation of commodities like oil, wheat, gold, aluminum, nickel, and packaging materials.
From an eCommerce point of view, this has many consequences.
- A large number of pending orders at the aggregator’s site would also make it difficult for retailers to provide timely deliveries.
- The closure of sea routes and airspace would also contribute to the delay.
- The shortage of packaging material increases supply chain stress significantly.
- The price of crude oil directly affects shipping and return costs.
For businesses, this has added supply chain stresses. Furthermore, it has made consumers more price sensitive. Now, even more than before, free shipping and returns will be a favored option for shoppers.
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Industry Changes That We Are Already Seeing
Shoppers enjoy a liberal return policy that lets them buy whatever they want with the confidence that they can return it without hassle. Returns are causing retailers to rethink this strategy as they struggle to figure out what to do with all those items.
For example, Zara has already begun charging its customers for returns after changing its free return policy. Nevertheless, the store still allows customers to return products for free as long as they have the matching e-receipt and it’s within 30 days from the date of shipment. Other high-return-rate fashion retailers are likely to pay close attention to the company’s move to charge for online returns.
From a consumer point of view, users took to social media to express their discontent at Zara’s latest move.
What You Can Do To Reduce Returns
For businesses, this is a frustrating time. One where there are increasing costs without a break in customer expectations. Can you still offer free returns?
In order to stay competitive, a strategic solution is to offer a free return policy while reducing the rate of returns. There are several methods you can employ to reduce them:
- Create an advanced Product Detail Page (PDP): Ensure that your product detail pages can carry as much information about a product as possible. With text, visuals, videos, infographics, comparison grids, etc. customers can make better-informed decisions.
- Leverage guided selling: Offer the benefits of consultation that users would have in an offline store on your platform. Through quizzes, live streams, and personalized consultations, you can help customers choose the right products.
- Limit free returns to store locations: You can also make free returns conditional so that consumers return your products to your offline store locations.
- Evaluate the cost of return: If the cost of return shipping (in addition to the original outward shipment cost) exceeds the value of the item, then it may be better to offer a refund with no obligation for the customer to return it.
- Personalized Returns: This is an idea where return policies are customized to shoppers and their loyalty. You can use personalized return policies to encourage customers to make frequent purchases, join VIP programs, or place high-value orders by reinforcing positive shopping behavior. Longer return windows and free shipping can encourage customers to return to your company again.
Summary: What Makes A Good eCommerce Return Policy?
An inconvenient return policy can make online shopping less convenient. By reducing the time and effort it takes for customers to return unwanted items, eCommerce companies can make the process more convenient.
A return policy that is easy to find and understand is one of the fundamental steps to improving customer satisfaction. The return policy should clarify whether returns are free and within how many days the customer must return the product.
Streamlining the returns process and providing a return label can make your eCommerce business stand out. Providing customers with an easy way to look up prior purchases, as well as their receipts, should be part of your portal. By tracking what items your customers are returning, you can improve reverse logistics operations.
Returns – what’s the best way to handle them?
- Optimize that process by using different software and APIs
- Offer pick-ups for returns to your customers
- You can set up return rules for different types of returns
- Offer the ability to reject or approve returns to avoid unnecessary returns and costs
- Enable return fees within your branded return portal to set any costs for returns for your clients
The process of managing returns isn’t easy. However, if you get it right, it’s a powerful way to demonstrate your commitment to customers and provide excellent service.
What Does This Mean For You?
Consumers still view a definitive retail return policy as a guarantee that demonstrates retailers’ trust in their products. A definitive retail return policy can help increase sales because customers look for it. In this year’s upcoming challenges and opportunities, it is always best to listen to your customers. Not changing the shopping experience now could result in loyalty in the long term. However, there are measures you can employ to reduce the rate of return so that your eCommerce return policy can at least be more cost-effective.
What To Do Next?
If you are working with 3rd party retailers and want to understand how effectively they serve your customers, then talk to us: moin@watersky-digital