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To stay competitive, brands are spending tons of money to make returns hassle-free for consumers. Increasing the ease of returns is a great way to increase customer loyalty and retention.
However, recently, brands have gotten so good at making returns hassle-free for consumers that the number of returns has skyrocketed. According to the NRF, total merchandise returns account for $369 Billion in lost sales for US Retailers.
The effects are even more significant with omnichannel brands. The money omnichannel retailers are spending on returns grows as their online sales become a larger part of their overall sales. Steve Dennis, President & Founder of SageBerry Consulting, calls this phenomenon the "omnichannel migration dilemma."
If they aren’t already, brands should be paying close attention to the number of returns and the costs associated with them.
As Peter Drucker would say, “If you can’t measure it, you can’t improve it.”
The Returns Epidemic
“Online shoppers want the same level of choice, control and convenience making their returns as they do making their purchases,” - Teresa Finley, CMO for UPS.
First and foremost, consumers want returns and exchanges to be free. According to a report by Walker-Sands, 54% of consumers said that free returns and exchanges made them more likely to shop online. The only factor that ranked higher was free shipping.
Unfortunately for brands, free returns are not free for the business. Returns increase costs in a multitude of ways. From shipping costs to increased labor costs (inspection and restocking). Not to mention that some of the returned inventory will no longer be in good enough condition to sell at full price (or at all).
Fraud & Abuse are Making Matters Worse
Unfortunately, good-intentioned policies are being taken advantage of by individuals who want the dressing room experience at home and criminal groups alike.
No, we aren’t suggesting that Jessica who is unsure about the perfect dress for her date is as bad as groups who are deliberately committing fraud. But both are sucking profits out of companies whose only crime is trying to take care of customers who aren’t pleased with their purchase.
According to Appris, for every $100 in returns, $5.00 is lost to return fraud.
Just let that sink in for a moment.
The same study estimates that the retail industry loses just under $24 Billion per year to returns fraud and abuse.
Every brand in the world strives to provide a great customer experience. But every brand can’t afford to hemorrhage money from returns.
Finding a Balance Between Customer Experience and Your Return Policy
Brands are in a dilemma:
1. Should they provide a liberal return/exchange policy? 100% satisfaction guarantee, no questions asked, etc.
2. Should they provide a more stringent policy? Restricts the amount of product a customer can return, the period in which they can return, etc.
Similar to most issues, the answer is in the middle.
Lenient return policies are a great way to win the hearts, minds, and dollars of consumers. Companies like Land’s End and Zappos have built their companies on the backs of generous returns policies. This bet on building relationships with their customers has paid dividends and is inseparable from their brand's image.
Despite all the positives of a lenient return policy, the risk of abuse can not be ignored. L.L. Bean is probably the most famous example of a brand changing its return policy. Last year, the company decided to end its 100% satisfaction guaranteed policy instituted by the company’s founder. Making this decision after they observed a significant amount of abuse from their customer base.
The abuse was so widespread that Company Chairman, Shawn Gorman, had his own donated shirt returned for a refund. L.L. Bean reported that the policy cost them $250 million over 5 years. Even so, the decision to change the policy was met with backlash from customers like the one below:
Some customers felt so betrayed by the brand’s decision that they even filed lawsuits.
Here are two more examples of companies who were known for having very generous policies who felt like they need to make changes:
- Costco - In 2007 the company restricted returns of electronics.
- REI - The company’s return policy was so lenient and return abuse was so rampant it earned nicknames like Rental Equipment Inc.
Have you considered changing your return policy?
Is return abuse a widespread issue for your company? Is it putting your company under immense financial pressure? It may be time to make sweeping changes to your return policy.
Here are the 4 main ways that brands alter their return policies:
- Require proof of purchase
- Require an item to be in its original packaging
- Reduce the amount of time customers have to return the item.
- Give customers store credit for returns
Worried about the cost of returns?
Don’t be! Ok, maybe you should just a little. Some of the biggest names in e-commerce are taking action against excessive returns. Amazon and Zappos have both suspended customers they identified as serial returners.
There isn’t a definitive best policy for deterring serial returns. But using data to target individuals who you know are pushing the limits of your return policy is a great alternative to making sweeping changes to your return policy. Sweeping changes punish your entire customer base for the actions of a few.
Reducing Returns with Zenkraft Dashboards
Zenkraft’s solution collects data on returns and packages them into easily digestible dashboards. These dashboards can be a valuable weapon in your efforts to crack down on return fraud and abuse.
Zenkraft’s dashboards will empower your team to make an informed decision to protect your margins. When analyzing the data you will be able to identify product categories, specific products, the reason for the return, and which customers are making the most returns.
After reviewing the data you can then determine what course of action to take. Whether that means, making wholesale changes to your return policy, changing your policy for a specific product category, or warning/banning customers who are testing the limits of your policy.
We can all agree that you’d rather your brand be on the first page of Google when you search “Generous return policies” instead of “Stingy return policies”. But just because your brand is perceived to have a less generous policy doesn’t mean it was a mistake.
Brands, especially those whose online stores are driving a large percentage of sales, need to be wary of the rising expenses associated with returns. And keep a close eye out for serial returners. It may be necessary to tweak your return policy to preserve the financial health of your company.
Brands span industries and sell completely different products. So why would there be a one size fits all return policy for every brand? I would look ridiculous in Shaq’s suit, but that doesn’t mean I won’t look good in a tailored suit.
Your return policy should be tailored to fit the nature of your product. Books and video games that can be completed in a week should have shorter return policies than refrigerators. If 85% of L.L. Bean’s customers were ok with the controversial decision to change from lifetime returns to 1-year returns. It’s certainly possible for your brand to strike a balance that is both customer-friendly and bottom-line friendly.
When it comes to shipping, studies show that what users really care about is not “shipping speed” but rather the date of delivery, as in: “When will I receive my order?”
The majority of e-commerce sites still provide shipping options such as “delivers in 3-6 days” or “next-day delivery” with a cut-off time such as “Order by 5pm”. This creates a bad user experience for the customer because they have to work out a.) what dates are 3-6 days out b.) if there weekends which will affect the delivery date c.) holidays d.) whether the order cut-off time has passed e.) whether it’s a peak time in the warehouse which will delay the order.
What is the best way for retailers to provide Estimated Delivery Dates in Salesforce Commerce Cloud? There are two options:
Build the logic themselves. This will involve a combination of carrier shipping API integration, some logic to determine the points mentioned above plus some knowledge of the carrier networks and how different service types perform across zones.
Use a Cartridge like Zenkraft’s to provide drop-in functionality.
Below we are highlighting 5 examples in Salesforce Commerce Cloud of where the Zenkraft Cartridge’s Estimated Delivery Date (“EDD”) can be used effectively:
1. Get estimated delivery dates on the product page
According to Baymard’s Product Page study, 64% of users looked for shipping costs on the product page, before deciding to add a product to the cart. Why shouldn’t you implement the same on your page like below:
2. Add estimated delivery dates to the checkout process
We recommend having a free standard and expedited shipping method available in checkout. In addition, if you have physical stores, you should offer in-store pickup. If you don’t have physical stores you might also consider UPS MyChoice or FedEx Office drop-off locations.
You might choose to display the name of the service type along with the actual cost.
Or with some CSS styles and formatting you can apply a better user experience such as in the page below. This is taking into account holidays and warehouse cut-off times:
3. Support Drop Off and Pickup Locations
Having your parcel delivered to a drop-off location provides the most flexibility for the cost. It’s often cheaper than other methods. Most delivery and collection points are open 7 days a week and are always found at the most convenient places. Often, they can be found in petrol stations, local shops, supermarkets and high street stores. Within the US, it’s pretty straight forward to offer Drop-off options with our FedEx and UPS locations plotted on the Google Map as shown below:
In Europe, it’s slightly more challenging because there are many more carriers (DHL, DPD, Hermes to name a few). Most have a drop-off network or partner with a third-party service such as Collect+ in the UK. Please contact us for more information.
Better still, if you’re an omni-channel retailer you should clearly show that in-store pickup is available on the product page and during checkout as an additional shipping option. It can act as a permanent free shipping option for your customers.
4. Add EDD to your tracking pages
Once the order is shipped it’s possible that the carrier might change the estimated delivery date. Therefore you should add the estimated delivery date to your tracking page. On our tracking page below you can see that we’ve added Einstein Product Recommendations using a content slot on the right hand side. The page is built using ISML so you’re free to edit and style it as you choose:
5. Send Changes to your EDD directly to your customer
If there is a failed delivery attempt, or the shipment is delayed due to bad weather, then you should alert your customer as soon as possible. Email is generally the best way which you can either send directly from Commerce Cloud or you can integrate into your ESP (email service provider) to send from there:
To summarize, using Estimated Delivery Dates effectively on your store will have a profound impact on your conversion rates both on product pages and during checkout. They’ll also increase customer satisfaction because you’ll be keeping your customers up-to-date with the shipment status. As the founder of FedEx Fred Smith once said, "The information about the package is as important as the package itself."