Retail is a constantly moving and evolving ecosystem, writes Matthew Jacques, Partnerships Director at ZigZag Global. Big events cause seismic ripples through this system and the recent re-introduction of paid returns is no exception. Key players, like Boohoo and Zara, have started charging customers and it seems like the rest of the industry will before long be tempted to follow suit.
Estimations vary over how much money retailers lose to returns each year. According to an April survey by shipping and mailing company Pitney Bowes, online returns cost retailers an average of 21% of order value. Given the other issues facing the industry like inflation, increasing wages, and fuel surcharges, this is a chunk of profit retailers need to recoup in order to survive. We have seen ASOS’ share price plunge by 15% with increased returns cited as one of the reasons. It highlights the necessity to get this process right and protect profit margins. The question for retailers is, how?
What is a convenient return?
It is vital to understand the difference between convenience for retailers and convenience for customers. Customers want choice over their returns options. This can come through a variety of different formats such as postal service, drop-off at a shop, drop-off at a locker, or, more recently, a collection from home service. Customers value retailers that can provide this multiplicity and embrace flexible demands.
For retailers, on the other hand, convenience can come in the form of information. Data can be used to optimise operations across the whole returns journey and is the catalyst for more efficient returns. Data can give retailers a better understanding of customer behaviour, meaning more focus can be put on areas of the business under the most pressure from returns.
The returns experience, like any experience for customers, has to be smooth, streamlined, and quick. If a retailer gets this process right they will drive higher levels of brand satisfaction and customer loyalty. If they get it wrong, research suggests it could have a significant impact on customer retention with 62% of UK shoppers saying they would not shop again with a retailer after a poor returns experience.
For retail to survive obstacles like mounting fuel surcharges, increased wages, and so on, the entire reverse logistics supply chain needs to work together as an ecosystem. When customers are under pressure, through inflation or the cost of living crisis, retailers’ sales are as well. Giving customers choice and presenting them with multiple options, whether that be through free returns, exchanges, or return to gift card, will satisfy customers and save the sale for the retailer.
A flexible rather than blanket approach to returns policies is how retailers can start striking this balance between being commercial and differentiating. Embracing this adaptability can provide greater convenience for all at various points of the year, especially in the lead-up to peak season sales. A tailored returns strategy can help retailers overcome current issues in the industry.
How to stay commercially competitive
We do expect to see more retailers starting to charge customers for online returns. But, to stay competitive it is crucial that retailers are completely transparent with their policies, clearly communicating and defining the returns options on websites.
If retailers are sensible with their buying, they’ll want to get high-selling items that have been returned into stock quickly to be resold. This can be done by offering a free returns window of 14 days then chargeable after this. It would keep stock items profitable and will keep popular items circulating whilst they’re still hot in the marketplace. It also prevents clothes from withering away in dusty wardrobes or being sent to the landfill.
Key retailers will, one by one, follow Zara’s lead in charging customers for returns. But, we would expect to see this only under certain circumstances. As peak season approaches, retailers need to have set a clearly defined approach to their returns options and windows. There will always be certain players who take an opposite stance to the market and that doesn’t necessarily matter when it comes to keeping returns commercial. A clear and flexible returns policy will keep them commercially competitive whilst keeping the customer experience efficient and transparent.
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