RETURNS ARE COSTLY, AWKWARD TO MANAGE AND MORE IMPORTANT THAN EVER TO A GOOD CUSTOMER EXPERIENCE BUT WHAT IS THE CURRENT STATE OF RETURNS AND THE CHALLENGES FACED?
With retailers so focussed on sales, returns and the returns process has always been the poor relation of retailing. But more retailers than ever are now focussing on the operational and business improvements that can be made from more efficiently dealing with returns that have benefits that go beyond simply improving the bottom line but increasing customer loyalty and efficiency of the business in general too.
The challenge is getting harder not easier since customers’ increasing level of expectation around retailers’ ever more omnichannel models means they not only have to sell products through the channel that best suits the customer but also take them back through the route that best suits them as well – whether that’s convenient for them to manage or not.
Our survey therefore began by asking retailers what patterns they were seeing in returns behaviour and whether in 2013 it had been on the increase or not.
Although half said returns rates were static a massive 42% said that they had risen and only 7% of retailers saw a drop in the number of goods being returned during 2013. This is a huge burden for retailers to bear – since it ties up stock which could otherwise be on sale at peak times at full margin and also impacts heavily on the bottom line – especially since most retailers invest heavily in refurbishing and repackaging products ready for resale as soon as possible after return in order to maximise sell through price meaning that timing is critical.
Jonathan Smith, head of returns at iForce says this is an increasing focus for retailers. with returns processing centres central to the trend. “Two years ago around 10% of product returned was refurbished. Now around 40% is and of that around 20% is pristine - perhaps with just the packaging damaged,” he says.
Given the increased focus on returns we then asked whether retailers were making it easier for customers to return products by widening the breadth of returns options open to them. A massive 57% said they were.
When asked how they were doing this in terms of additional returns services offered by retailers beyond postal returns, the survey showed that more than half of retailers (56%) also offer return to store options whilst 41% offer collect from home returns where couriers will collect goods to be returned.
The popularity of third party drop off points such as Hermes ParcelShop where shoppers can collect and return goods at locations ranging from petrol stations to corner shops was also supported by the results of the research report into returns which showed that 31% of retailers were now using third party collection and return networks such as these in order to make returns easier.
However we also asked if newer tactics – such as returns lockers – were also being used. Although such networks are growing our survey showed that only 1% of retailers said that they were using them.
Hadling returns efficiently and speedly is of the essence to both get goods back out on sale as quickly as possible - and therefore at as high a value as possible bu also to keep customers happy and onside. When asked what their biggest challenge when handling returns retailers in our survey said timing came second only to maximising asset recovery with one in five saying it was their biggest challenge.
The ideal is to refund the customer as soon as possible - since doing so not only keeps the customer happy but also maximises the opportunity to win an alternative sale either through the feel-good factor achieved through a quick and easy return process or simply becouse the customer has the money back in their account at the point they are still wanting to buy.
The survey therefore asked retailers what their turnaround time from the receipt of a customer return to completing the returns process with the customer was to see how quickly retailers were managing to check product and to re-credit the customer once they had authorised the return as being legitimate.
The survey showed that in general good timescales were being met. Just over half of retailers (52%) managed to turnaround refunds to customers within one to three days of receipt of goods. However significantly nearly a third of retailers (32%) were waiting four to five days after receipt of goods before checking product and re-creating the consumer and 17% were waiting six days or more.
Although the legal obligation for refunding customers who have bought from a site may be longer very moment that the customer does not have the money back in their pocket is a time that they are unable to spend with you and likely to be badmouthing the brand. It's surely not worth the risk. Yet when we asked retailers if they saw a business case to improve the turnaround time nearly two thirds (61%) said no. This has to be a priority for retailers.
Of course if the survey showed 57% of retailers were making it easier for customers to return products it also showed that 43% of retailers hadn’t improved ease by use by widening returnsoptions. We therefore asked if they hadn’twhen they were planning on doing so.
The results showed that it is an area of future focus for more than a third of retailers. More than 16% said widening the breadth of returns options to make it easier for customers to return goods was something they were considering in the longer term and 18% said it was something that they were considering doing in the next six to twelve months – illustrating the fact that retailers realise this has to be a priority within their business.
However a further third also admitted it wasn’t something they were consideringbecause they felt it was not a priority or was too complicated and therefore they were limiting their returns options to store and postal returns only.
Whilst some retailers embrace the ability to satisfy customers by offering wider returns options for others the abilityto limit returns by limiting the ability bywhich a customer could get a product back to the retailer is often the motivation behind not doing more. “We want to minimise returns,” said one retailer in the survey. Another agreed: “Processingreturns is costly and a hassle,” they said.
Andy Young, manager of Fox’s Outdoor, says that making returns too easy encourages higher returns rates and that can harm a business such as his where returns have a big impact because of the challenges of dealing with them. “We are not actively encouraging returns other than making customers aware they have the right to return goods,” he says.
And at Boden customer service manager Peter Hutton says that too much choice can actually backfire for a retailer too wide and complex a range of returns options. “If you start to add more and more options it complicates the customer choice,” he says.
Vicky Brock, CEO of Clear Returns, believes the breadth of options is needed however. “I think the complexity at the moment is a necessary stage to try to getcloser to what is going to work best for thecustomer and what logistically works best.What you ultimately want is what’s best for the customer and what’s best for the service to return,” she says Managing returns – and the customerrelationship – is key to a successful returns process and Young admits this can be challenging. He cites the particularchallenges he faces on some of his productranges such as tents, where customers cancomplain a good is faulty simply when it has been misused. Finding the right balance to deal with returns which are not actually faulty and finding a satisfactory resolution with the customer can be tough, he admits but is vital to future loyalty. “This is especially challenging during the summer with tents as there are many issues that can arise with tentsthat if not used properly cause problemsthat are not covered by manufacturers’ guarantees,” he says.
At Sainsbury’s reverse logistics manager Steph Tite says it is vital to get the correct balance between the needs of the consumer and the retailer when dealing with returns. “The main challengeis the balance between cost to serve and customer satisfaction,” she says.
For Fox’s Outdoor size has a direct influence on cost since when items such as tents are returned they are both harderto manage, store and distribute through the returns process. “The cost of collectinglarger items from customers is also a problem. We cope with them by keepingan open dialogue with the customer and keeping them informed all the way through the process and ultimately try if this costs us in the end, we see it as an investment,” says Young.
But such investment has to be balancedand pay off in the end. At fashion retailer Warehouse digital merchandiser Liam Price says the company has seen two trends in the returns behaviour patterns of its customers – both in terms of increasing rates of returns across all channels and customers returning product faster. “Our customer is returningquicker than ever before - whether it be tostore or online,” he says.
In reality the customer expects an manage despite the complexities for them of doing so. “The biggest challenge we face is cost associated to processing a return. That’s the cost of getting the parcel back to our refurbishment centre, the manpower to process and repackage theitem and ultimately the lost sales while the stock has been out of sale,” says Price.
It’s a constant challenge for any retailer. “As online demand increases year-on-year, but returns also increase, a large percentage of stock is ‘off the the site some two to three weeks after it was initially sold causing issues with maintaining availability,” he says.
Returns are no doubt still a difficult challenge to handle. At honline jewellery manufacturer and retailer DiamondGeezer.com cost of returns is also important. As the company’s main business is in made to order engagement rings with an average price of £3,200 it is generally a well-considered purchase from customers and this in itself ensures returns are low, according to CEO Clive Billing.
However he says the company also works hard to manage returns because of their impact on margins. “If our returns go up that’s a failing on us. We have to then reduce the cost of dealing with the returns so they don’t add a premium to our costs so we don’t need to have to a margin for returns,” he says.
The Christmas Experience
Our survey also saw us ask what retailers were expecting in terms of returns oChristmas than last year whilst half said that they expected little change on last year and 31% said they expected return rates to fall.
We surveyed retailers again post-Christmas to see what the reality of Christmas was. Although not comparable samples (since there were different respondents to the second survey) the numbers were similar. One in five reported higher than expected post- Christmas returns, just over half (52%) the same as last year and 28% saw a fall.
Although just over half (53%) said that they attributed the rise in returns to a comparable rise in sales a massive 47% didn't. One retailer said the custome is changing. "It's a more demanding customer base that is treating some product as fashion type purchases for the firs time," said the retailer.
Although traditionally Boxing Day is a big day for post- Christmas returns the retailers in our survey saw a steadier pattern with 69% saying that their peak retailers in our survey saw a steadier pattern with 69% saying that their peak returns period was in the second week after Christmas. Although this is easier for store staff it does mean stock is lickely to have depriaced substantially in resale value by this point.
To improve the returns process a quarter of retailers extended their returns period to mid-January and 16% to the end of the month allowing more time for customers to return goods in quieter periods. Most retailers (88%) simply dealt with returns as normal in this period but 5% did as the likes of Next and Mark and Spencer do and set up a dedicated returns / refund till instore whilst the process through the tills.
Finally our survey asked if retailers were planning any changes to their returns policies as a result of their experience during Christmas 2013. Most said it was business as ussual but one retailer highlighted a problem that can be common to all. "Our returns are often picking issues caused by inexperienced Christmas temps. "Our returns are often picking issues caused by inexperienced Christmas temps. We carefully recruit and train staff to ensur mistakes are minimised," said the retailer.