The world of online shopping and enhanced customer experience has been transformational for retailers and customers alike. With more choice and flexibility when it comes to purchasing, buyers are more inclined to make purchases knowing that if they change their mind or something isn’t quite right, returns should be seamless. However, making the return process easier, while good for the customer in terms of their experience with the brand and flexibility of choice, also highlights the growing issue of increasing returns in retail.
In-store returns, although less frequent compared to online returns, still pose significant challenges for brick-and-mortar retailers. The return rate for physical stores averages around 10%, which for any retailer is likely to indicate a significant amount of potential profit lost.
Understanding the Problem of Rising Returns in Retail
Rising returns aren’t just an inconvenience for the flow of in-store operations. They also prove a significant financial burden on the retailer, for reasons more than just selling less.
Some of the impact is the cost of restocking and potential markdowns. When a customer returns an item, it needs to be brought back into the system, potentially may not be possible to resell, and takes physical time and energy to process. While an online store may have a dedicated returns department, in-store this is almost always done by the retail staff who are also managing the floor and cash registers.
The other really concerning financial impact is the losses from fraudulent returns. It is frequently reported that fraudulent returns accounted for billions in losses in retail, both online and in-store. And in brick-and-mortar stores, it’s been reported that around 10.3% of all returns are fraudulent with a loss ranging around $62.1 billion dollars.
The Scourge Of Fraudulent Returns
There are many different ways that this fraud can manifest itself. Apparel is one of the most common areas, with practice such as wardrobing (where a customer will wear the item, leave tags on and then return it for a refund), or returning stolen goods. Some statistics state that up to 50% of clothing returns fall into this category. And another worrying statistic from Capital One’s research is that 26% of online items returned to in-store locations are fraudulent as well.
This soon adds up for any retailer with every $100 of returned merchandise losing around $10.30 to fraud (just over 10%), for retailers.
Examples of Tough Stances by Retailers
Retailers are starting to fight back on this, which has caused some issues with the customer experience. While many shoppers use return policies honestly, the impact of these fraudulent returns has meant having to sacrifice some of that customer experience to protect from losses.
Some of the ways that retailers have done this is through restock fees such as Zara, or H&M using customer data to track unusual patterns of activity. Online retailers such as ASOS and PrettyLittleThing.com now implement bans on customers who constantly return items, and retailers such as Amazon and Macy’s have reduced the returns deadlines to prevent items from being purchased for an event and returned.
Tips to Handle Returns Effectively
So how can retailers prevent returns in the first instance? This is where having a solid, personalised sales strategy, with minimal friction can be key to preventing those losses.
Accurate and Accessible Product Information
The first is by offering great, accurate and accessible information about the products. Having the answer to “will this fix my problem” before purchase prevents a customer from returning an unsuitable item.
This can be done by offering information about size, colour, material, and usage instructions, through in-store kiosks or mobile assistants, linked to a smart system such as refive.
When a customer makes a more informed purchase decision, it will reduce the chance of a return.
Personalised Recommendations
Another way that this can be reduced is by making sure that the personalisation offered to customers is as detailed and accurate as possible. So if a customer buys a lot of one particular product or brand, the personalisation of the system means that they won’t be recommended something that is irrelevant to their purchases. An example of this in practice would be a person with straight hair, won’t be sent product recommendations designed for curly, natural hair types.
Not only does this prevent the customer from purchasing an incorrect product which then later be returned, but also provides a much more enriching experience for them as well.
Free In-Store Returns
Another way, that also deals effectively with fraudulent returns, is to utilise in-store free return policies. This means that while not all issues will be addressed, a member of staff can inspect items carefully before accepting them. This also adds an element of personal interaction that can overcome those with a stronger conscience, with some people not feeling like they can lie to an individual rather than posting off anonymously.
Also, this saves the time and human resources spent on dealing with return shipping and restocking.
Free Returns for Loyalty Programme Members
Another way to do this is to offer it as a perk for a loyalty programme. So while a customer may want to return things, they trade that off with being able to offer more detailed data on their shopping experience, behaviours and patterns. This also creates a paper trail and more detailed data for trends as a whole and also offers a better customer experience for the customer overall leading to greater retention.
Digital Receipts
Digital receipts provide an easy to store proof-of-purchase, which make the return process easier and also prevent any issues when it comes to fraud as the receipts can be traced in the retailer system. There is no option of “losing” your receipt either, so it prevents incorrect returns and those who may try and abuse a paper-based system.
Taking Action on Rising Returns in Retail
The issue of rising returns in retail must be taken seriously. It is something that is expected now as part of the customer experience that customers can return items freely. However, it is important to make sure that this is used correctly, prevented wherever possible with great customer service, information and personalisation, and also prevented from being abused by those who would seek to do so.
Using smart technology, such as that provided by refive, implement things such as smart receipts, AI to track trends and patterns, and feedback collection, as well as in-store touchpoints to make returns easier for those customers who truly need it.
If you are a retailer looking to overcome the challenges of returns in-store, and online, then get in touch today for a chat and a demonstration on how refive can mitigate those issues. This will not only help your best customers get the service they deserve but also help internal operations and drive better profitability as a result.
