British retailers have long been at the forefront of ecommerce. As one of the most mature retail markets in the world, UK brands are often used as a yardstick for other markets to measure themselves against, whether in terms of customer service or range of products. And when it comes to delivery options, the UK consistently comes out top in terms of range, speed and delivery options.
However, on the other side of the fulfilment coin, retailers have traditionally approached their returns policy with some degree of caution and reluctance. It’s easy to see why – the process can be expensive, time consuming and the stuff of logistics nightmares. But offering a purposely restrictive returns process is a short-sighted solution to what is an inevitable cost of doing business in ecommerce. Retailers who fail to acknowledge this risk damaging brand perception or putting customers off ordering in the first place.
While it can be a challenge, new research conducted by Klarna shows that there’s also a big opportunity for retailers to capitalise on the online returns process. In fact, our study showed that retailers who focus on creating a positive returns experience are more likely to increase sales and boost profit – with two thirds of online shoppers (67%) saying easy returns are an essential factor in their choice of retailer, and 28% of online shoppers saying they would spend more if there was an easier process.
We’re starting to see this returns revolution take root internally, too – over three quarters (78%) of merchants we surveyed said they saw returns as a competitive differentiator, and a huge 83% acknowledged they needed to improve their returns capability.
The rise of “buy to try”
Our online shopping habits have sparked a revolution in consumer attitudes towards returns: nearly 9 out of 10 (87%) of online shoppers have returned items purchased online.
We’re seeing a new “buy to try” mentality emerging, with today’s on-the-go shoppers wanting to be able to see and feel an item before they decide to keep it. Increasingly, shoppers are turning their sitting rooms into fitting rooms – with 41% of UK online shoppers saying that they order multiple items to try on at home and send back what they don’t want.
This is primarily driven by Generation Y. As the biggest returners, millennials are the least tolerant of a poor returns experience. Indeed, 70% of 25-34 year olds would only buy from an online retailer if they offered free returns – and encouragingly, 40% would spend more with a merchant who offered an easier online process.
It’s clear, therefore, that there’s a sizeable prize for getting returns right.
Perfecting the returns process
As a customer’s last potential touch point, the way you handle returns could be make or break. Much in the same way that flexibility is key in delivery options, any returns experience must meet consumer expectations by being a convenient and straightforward process.
By introducing restrictive policies that lock down returns, online retailers are missing a huge opportunity. Their best customers can have the highest returns rates and still be the most profitable. Indeed, our shopper transaction data shows that regular returners are more valuable customers for retailers – making more frequent purchases with a higher overall net purchase volume, even after the value of the items returned has been removed. Restricting returns will only send these customers elsewhere.
So instead of viewing returns negatively, retailers can instead use returns to improve the customer experience and build brand loyalty. Taking steps to getting the product “right first time” will go some way to alleviating the burden of returns, particularly for fashion retailers. Providing as detailed and accurate information of goods as possible will leave less room for surprises when the consumer receives them, as will integrating features such as virtual fitting rooms, high-definition zoom and 360-degree product views.
Many retailers also blame difficulties around cash flow on returns. It’s a valid concern, which can dramatically skew sales reports and subsequent analysis. But reviewing your payments process will help. Retailers will reap even more rewards by linking the returns to payment, and allowing customers to pay after delivery will help solve the difficulties and the confusion for accounts.
This option is also appealing for customers. Giving shoppers a convenient way to “try it, love it, then pay for it” can work as a powerful incentive to purchase: 25% of online shoppers said they were more likely to shop again with a retailer who had a pay after delivery option – and encouragingly, only 9% said it would make them return more items.
Reaping the rewards
While retail professionals acknowledge the power of returns, it’s now up to them to champion and encourage this internally. After all, flexibility is the USP of ecommerce, but only if this extends to all areas of the shopping journey.
By shifting the discussion around returns from a cost-based one to a customer relationship differentiator, retailers can help reassure buyers, build loyalty and make their brand stand out in an increasingly competitive marketplace.
Luke Griffiths is managing director at Klarna UK