In a tough economy where margins are getting tighter, a number of major clothing brands – from Zara to Boohoo – have recently introduced fees for online returns in order to help plug the profit gap caused by the rising number of returns.
It makes sense on the surface. The cost of fulfilment and returns can often end up charging retailers more to get a product back than for a customer to just throw it out and be refunded. That’s not forgetting those already successfully abusing a retailer’s policy by making false returns claims – for example, by returning something that is already worn or sending back a box of rocks in place of goods.
But charging for returns is a stop-gap solution, writes Joe Gelman, policy abuse expert at Riskified.
Consumers are more cost-conscious than ever too, and charging for returns only plays into the hands of the retail giants of the world that can absorb the costs of returns and make it super easy to return, for example via partnerships with local stores to facilitate drop off points.
The reality is that consumers are likely to start shopping elsewhere without the guarantee of a free and easy returns process. Ecommerce retailers need a longer-term solution that doesn’t harm consumer relationships.
There are a number of other factors that can be considered to help create a more creative policy and solution that works better for both retailers and the customer.
Customer loyalty = free returns
The cost of acquiring a new customer is around five times higher than it is to retain an existing customer. Returning customers are a key driver for success for retailers, and should not be penalised by having to pay for returns because retailers are not able to distinguish genuine returns from return abusers.
Treating loyal customers the same as fraudsters is not only damaging for the brand-customer relationship, but discourages customers from returning to a brand. Repeat customers tend to be great advocates, which also works in the retailers favour when it comes to acquiring new customers, and so retailers must give them a reason to keep coming back.
Implementing a customer loyalty programme, and including free returns as one of the perks can encourage more spending and keep your customers coming back for more, whilst deterring the efforts of one-off return fraudsters.
Utilise personalisation to fill the blanks
Returning customers also tend to be more open to sharing personal data in exchange for a better customer experience. For retailers, more data means it is easier to build a detailed customer profile based on multiple shopping experiences which can be leveraged to deliver tailored shopping experiences.
By ensuring more appropriate products are being marketed to a customer online, there is a greater chance that the customer will be happy with their purchase and therefore less likely to return the item.
Assess identities, not accounts
Don’t underestimate the online shopper of today – when coming up against the limitations of a returns policy, even good customers are likely to get creative and find a workaround – with changing your account an obvious place to start.
Better customer insights and analysis that take a holistic view of shopper identities help determine the ‘risk’ level that a customer has, based on previous purchases, and allow retailers to author tailored policies accordingly. It’s the only way to truly enforce returns policies, but retailers also win by getting to know genuine customers better and building a strong relationship with them that allows them to offer a more flexible policy that incentivises those good shoppers to keep coming back again and again.
Policy is a complicated beast, especially for returns. Thankfully, data and tools exist today that mean retailers don’t have to needlessly lose customers with strict returns policy. Automation and more dynamic rule setting help accurately detect abusive customers and mean your loyal customers, if you’ll excuse the pun, return.
Joe Gelman, policy abuse expert at Riskified