BALANCING FULFILLMENT & DELIGHTING CUSTOMERS WITH THE RETURNS PROCESS

We’ve all been there: that time you’ve been disappointed with an item you’ve purchased, only to go through a returns process that puts you off from buying

anything else from that retailer. In fact, returning goods is so common that 67% of consumers we’ve polled indicated they’ve done it. There is even a term for

shoppers who chronically returns items - ‘returnholic’.

On the flip side, some retailers view returns as the migraine they prefer not to address, and chose instead to stick to rigid policies aimed at combating return

fraud. While these policies may be effective to a degree, they can destroy relationships and alienate genuine customers.

In this report we’ll explore how returns impact both retailers and consumers, and what eCommerce merchants can do to alleviate the tension, and convert the

returns process into an opportunity to delight customers for retention.

The Returns Conundrum

temando.comWalking the Returns TightropeBalancing Fulfillment & Delighting Customers with the Returns Process

We polled four countries with high eCommerce activity: United States, United Kingdom, France, and Australia, to see if there was any difference in the impact of returns from country to country. While there were slight differences in how responses were weighted across the countries, we found that retailers generally had a poor understanding of returns from a consumer’s perspective.

Americans are the most active returners at 75%, while Australians are the least active. This disparity between both countries may be attributed to the customer-centric returns policies offered by leading American retailers such as Nordstrom (NTSE:JWN), L.L.Bean, and Bed, Bath & Beyond (NASDAQ:BBBY) which is not common practice for many other retailers from other parts of the world as yet.

Returns impact retailers differently. 82% of retailers experienced up to 10% of their shipped items returned, with almost a fifth seeing 6% to 10% of shipped items returned. 39% of retailers saw a nominal 1% to 5% of items returned, whereas 21% of French retailers experienced a higher proportion of returned items between 11% to 20%. As online shopping progressively becomes the norm, retailers who take the initiative to update their returns processes to cater to growing demand will be the ones to emerge as customer champions with long-term competitive advantage.

Current State of Returns

HAVE YOU EVER RETURNED ITEMS PURCHASED ONLINE?

YES

67%33%

75%25%

73%27%

66%34%

53%47%

WHAT PROPORTION OF TOTAL ITEMS SHIPPED ARE RETURNED?

AVERAGE

“Free and easy returns—including the ability to return or exchange online purchases in stores—are becoming table stakes.”

- McKinsey

NO

24%

24%

19% 2%39% 9% 6%

15% 25% 2%37%

37%

11% 7%

28% 18% 2%35% 8% 5%

15% 2%

2%

12% 9%

30% 17%45% 4% 1%

LESS THAN 1% 6% TO 10%1% TO 5% 11% TO 15% 16% TO 20% 21% TO 25%

AVERAGE

Walking the Returns TightropeBalancing Fulfillment & Delighting Customers with the Returns Process

Walking the Returns TightropeBalancing Fulfillment & Delighting Customers with the Returns Process temando.com

Cost Increases

14% of retailers are not confident about their ability to manage returns, with almost a third feeling ambivalent. Just over a third of retailers are somewhat prepared, while 22% are confident that they’re equipped to meet demands over peak periods, with American and British retailers leading this category at 29% and 25% respectively. French retailers are the least prepared at 27%.

The data suggests that only a small section of retailers are running their returns programs efficiently, and not many have taken into account evolving online shopper patterns which necessitates a review of fulfillment processes.

HOW WELL PREPARED ARE YOU FOR EACH OF THE FOLLOWING THIS HOLIDAY SEASON?

22%2%

1%

1%

1%

12%

11%

8%

9%

22%

30%

28%

32%

34%

34%

37%

33%

5%

29%

29% 31%

30%

14%

25%

21%

AVERAGE

UNPREPARED SOMEWHATUNPREPARED

NEUTRAL SOMEWHATPREPARED

WELLPREPARED

HAVE YOUR COST OF LOGISTICS (PICK AND PACK, SHIPPING, RETURNS ETC.) INCREASED AS A PROPORTION OF SALES OVER THE LAST YEAR?

4%

1%

*%*%

1%

1%

2%

2%

6%

33%

33%

30%

30%

41%

33%

31%

24%

29%

29%

25%

4%

5%

35% 29%

AVERAGE

DECREASE IN COSTS

NO CHANGE LESS THAN 5% INCREASE

IN COSTS

5% TO 10% INCREASE IN

COSTS

11% TO 20% INCREASE IN

COSTS

21% TO 40% INCREASE IN

COSTS

As retailers become increasingly dependent on eCommerce, online shoppers will come to expect great experiences from the moment they browse, to when they need to return an item. With leading retailers offering free and/or extended return periods, how can retailers balance the increasing cost of logistics with fair product pricing to maintain their competitive advantage? To find out, we first asked retailers if there are any changes in their cost of logistics compared to the proportion of sales in the last year.

Although a third of retailers saw no change in the cost of logistics in proportion to sales over the last year, 60% of retailers saw up to 10% increase in the cost of logistics, with almost half seeing increases of 5% to 10%. Only 5% reported a decrease in cost, which suggests that not many retailers have found the right balance between providing customers perks such as free returns with a cost efficient fulfillment strategy.

“Product returns cost U.S. manufacturers and retailers $100 billion every year in lost sales, transportation, handling, processing and disposal.”

- IndustryWeek

30%

7% 36%

temando.comWalking the Returns TightropeBalancing Fulfillment & Delighting Customers with the Returns Process

Know Your Customer?Returns can be a costly exercise that must be managed correctly. However, a business cannot run without customers, and retailers must design their value proposition around this audience to succeed. To find out if retailers are meeting customers’ expectations, we asked both parties for the main reasons goods are returned. The top reasons cited by retailers are: broken goods, incorrect sizing, and a change of heart by customers. However, when consumers were asked the same questions posed to retailers, only 16% cited a change of heart, compared to the 42% cited by retailers. This disparity is consistent throughout, with ‘broken goods’ being the only reason aligning both parties.

Barriers preventing customers from utilising the returns policy includes the additional costs involved and daunting processes. Out of all four countries polled, Australians were the most easily discouraged, while British consumers were more stoic in their approach to returning items. Only 9% of French consumers were discouraged from returning items for fear of creating a dispute, compared to the global average of 25%.

Providing customers with the flexibility around returns demonstrates empathy, and reinforces the message that the brand gets its customers. To continue being resistant to the changing retail landscape, and go down the dangerous path of “this is how we’ve always done it” will put retailers at risk of being pushed out by innovative competitors.

WHAT IS THE MAIN REASON PRODUCTS ARE RETURNED?

RETAILERS CONSUMERS

31%

36%

61%

39%

WE DON’T ASK WHY PRODUCTS ARE RETURNED

22% 41%

42%

3%

5%

16%

14%

6%

24%

SIZE WAS INCORRECT

THE CUSTOMER CHANGED THEIR MIND

THE GOODS ARRIVED BROKEN

THE COST OF THE RETURN WAS FREE

THE GOODS DID NOT LOOK THE SAME AS THEY DID ONLINE

OTHER

“Seamless returns and other hallmarks of the post-purchase experience can make or break a retailer’s reputation.”

- RetailDIVE

42% 35%

35%

36%

37%

34%33%

31%

14%

14%

25%

20%

46%

47%

38%

38%

56%

56%

57%

59%

51%28%

13%

11%

9%

PROCESS TOO DIFFICULT

I DIDN’T WANT THE POTENTIAL

HASSLE/DISPUTE

D0N’T WANT TO PAY FOR

POSTAGE

TOO EXPENSIVE NOTHING

AVERAGE

WHICH OF THE FOLLOWING WOULD DISCOURAGE YOU FROM RETURNING AN ITEM PURCHASED ONLINE?

TOO EXPENSIVE

35%

PROCESS TOO DIFFICULT

42%

DON’T WANT TO PAY FOR POSTAGE

56%

3%

4%

4%

5%

5%

I NEVER RETURN THINGS

Walking the Returns TightropeBalancing Fulfillment & Delighting Customers with the Returns Process temando.com

Go for Gold: How to Win with Returns

temando.com

The challenge that lies ahead for many retailers now is finding the balance between providing personalised customer journeys while improving operational efficiency. While this process may sound daunting, it is achievable if approached with a positive attitude and the right technology stack. Are you following these best practice rules when it comes to your returns strategy?

1 . Brand Your Returns ExperienceWhy would you disrupt your customer’s journey by taking your customer to a 3rd party website that does not reflect your brand? With online returns rising, your returns portal is no longer an add-on to your eCommerce strategy, but a key customer resource. Consider implementing the following:

• Re-skin your returns portal with your brand to completely immerse your customers in an experience you control, and make the returns process familiar, and really easy for your customers to navigate.

• Include special offers as part of your branded returns experience to let customers know that they are important, or update your portal with your latest global campaign, localise regionally, or segment by major categories or labels.

2. Put Customers in the Driver’s SeatWith customer service calls being a common pet peeve, retailers can soothe frustrations by offering an easy, automated, online returns portal which gives customers complete control and choice over how, when and where their goods are returned. Options offered by best in class retailers include:

Data SourceData for this report is extracted from Temando’s Annual 2015 survey of retailers and consumers from United States, United Kingdom, France and Australia:

• 852 retailers in the micro, small, medium and enterprise segments across the following categories: clothing and accessories, electronics and appliances, furniture and home, health and personal care, sporting goods and hobbies, food and beverages (excluding grocery), and books and stationery.

• 4128 male and female consumers aged between 16 to 55+ years old, spending under $100 to above $501 per month online, across the following household segments: living with parents, single living alone, couple with no children at home, young family, middle aged family, older family, retired couple, and single pensioner.

“The most important factor for online shoppers isn’t price. Other factors - like return policy, convenience and viable testimonials about the product - often surpass price in importance. The reason? They build trust.”

- Inc.

• A range of ways to return goods such as drop off, pick up, by mail, or in store with clear information on costs and expected times. Or pass on the savings from automating your returns process to your customers by offering free standard returns.

• Give customers the option to return items for more than a standard refund or exchange. Offer merchandise credit, a gift card, or extend a one-time VIP discount or free express delivery to tip the transaction in your favour.

3. Automate Your Back EndAlthough some retailers feel prepared to manage returns, a bulk of them are using inefficient processes that are wholly dependent on manual intervention: from communicating to customers, processing returned items, securing replacements or refunds, and mailing out new items in a timely manner. To ensure customers don’t bear the brunt,, consider updating your back end with these quick wins:

• Automate as much of the returns process as you can. By enabling your customer to easily book in return shipments via self service portals, you can cut down on unnecessary back andforth communications, while maintaining a professional and consistent approach. For instance, once a return is approved after a customer submits the details in your returns portal, a returns shipment label and courier pick up details will be automatically sent or made downloadable for your customer.

• Ensure systems and processes are in place to efficiently deal with returned goods once it arrives in your warehouse or store. Staff should be well trained to physically inspect the goods, and check increment inventory levels to trigger further customer communications and refunds.

The ability to convert a disappointing experience of which is the basis of why customers return items, into one that is pleasant can be the defining factor for why shoppers choose your store over another. As eCommerce continues to thrive, it’s becoming increasingly important to ensure you are able to retain and grow market share in a scalable manner – and that means reducing shipping and fulfillment friction in every area possible. So why not start by reviewing your returns process?

To find out how Temando can help you build a returns process that will delight even your toughest customers, request a demo or chat with us now.

temando.comWalking the Returns TightropeBalancing Fulfillment & Delighting Customers with the Returns Process

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