An excessively high number of online returns is one of the biggest problems of the e-commerce industry today. In 2018, total online retail sales in the U.S. were about $517 billion, but the returns amounted to a massive $156 billion, accounting for 30% of all sales. Amazon, which delivers about 40% of online merchandise in the U.S., also suffered from excessive returns due to its overly generous return policies. With such staggering return rates, the cost of dealing with returns becomes a real concern for online sellers. More specifically, for every item returned, the online sellers need to:
- Offer a postage-paid return label.
- Issue a refund or ship a replacement item
- Re-package, re-stock, or dispose of returned items
There is no doubt that these expenses will eat into profit margins. What’s more, online sellers might lose repeat customers if they aren’t happy with the returns process. How do we deal with this issue? Here are six practical ways to reduce your return rates.
- Reduce false return claims and prevent outright return frauds
In a recent survey by the National Retail Federation, 30% of all online returns are estimated to be either fraudulent or abusive. This costs online retailers nearly $35 billion annually just in the U.S. Examples of return abuse include:
- Customers claiming that they have not received a product at all
- Customers claiming that their package is missing an item
- Customers returning old used items instead of the new items they have received
- Customers damaging a product and claiming they received a defective product
You can easily address these issues by keeping evidence. More specifically, you can record your packing process before each item is shipped and send the recorded videos to your customers. In addition, fulfillment solution companies like MARQ offers an easy way to record videos for free.
Customers who receive packing videos before their products arrive are less likely to return for a few reasons. First, your customers will appreciate the transparency and be more likely to trust your brand. Second, there seems to be a deterrence effect on return frauds when there is clear evidence that your product or shipment had no problem. According to Return Logic, online retailers who use packing videos see a 40~50% decrease in their return rates.
- Make sure your customer has sufficient information about your product
A more indirect way to reduce online returns is to ensure customers buy the right product. You need to provide as much information as possible about your product to do this. At the very least, your customers should have access to information about:
- Key features, benefits, and technical specifications of your product
- Clear product photos and videos of your product and its use
- Detailed answers to commonly asked questions and user inquiries
- Ratings and reviews on your products
Providing customers with comprehensive product information will result in fewer returns and ultimately reduce your return costs.
- Avoid making shipment errors
23% of online returns are due to incorrect items being shipped, and another 20% are due to products being damaged in transit. Those mistakes not only cost you time and money to rectify but pose a big risk to your customer satisfaction and loyalty. To avoid sending incorrect items, you can adopt a scanner to tag items with the barcode to take out the factor of human error. To prevent shipping damage, you can wrap items individually in cushioning material or add material to fill any empty spaces in your package.
If you experience these types of errors regularly, you can outsource your fulfillment to a specialist provider, which already has safeguards against shipment errors in place. Top international fulfillment companies include Shipmonk, Rakuten Super Logistics, and Shipbob.
- Tighten your overly generous returns policy
An overly generous returns policy invites return frauds and abuses. For example, recently, L.L. Bean put a limit on its policy of accepting returns. The company used to accept returns of any of its products after any period of time if customers were unsatisfied for any reason. But abusers, particularly over the past five years, took the company’s return policy as a replacement program to offset normal wear and tear.
According to Practical E-commerce, online sellers could decrease returns by as much as 20% just by tightening returns policies in response to growing return frauds.
- Collect data on the reasons for returns
Knowing the reason for the returns is important to reduce returns in the future. You can adjust your products, website, or shipping process once you find out the reason. Return Merchandise Authorization (RMA) helps you deal with returns better. It requires your customers to visit a webpage and enter the reasons for their returns before generating a postage label and packing slip for their items. This lets you easily collect data from your website and forewarns you that an item is on its way back, helping you manage your stock and cash flow accordingly.
- Turn your returns process into a positive experience
Even if you take all of the steps above, returns do occur. But it is important to reduce the return rates by turning the returns process into a positive experience. In a recent survey, 92% of customers said they would buy from a business again if convenient for the returns. There are two different ways to provide positive return experiences:
- Offer to track: return is a lengthy process for your customers. They will feel even longer if they have to wait without knowing where their products are.
- Process quickly: customers want to receive a refund or exchange fast. The speed of the process will determine your customer retention.
Online retailers will maximize their sales in the rapidly growing e-commerce industry once they have the right returns strategy. Unfortunately, reducing returns is often overlooked yet the most effective way to grow online for Amazon sellers.
Eric loves to take a data-driven approach to uncover customer insights, accelerate sales funnel, and generate revenue. Eric is currently working as Head of Growth at MARQ.
MARQ uses computer vision technology to address return problems for online retailers. Using MARQ, online retailers can dramatically reduce return claims and improve customer satisfaction. Please visit https://www.marqvision.com/ for more information.