Other parts of this series:
Consumers increasingly expect hassle-free returns and exchanges and it’s costing retailers millions. With the rise of e-commerce, returns have become an integral part of the digital customer experience and post and parcel organisations are playing a key role in lowering returns costs while eliminating friction from the returns experience.
Returns have become an important part of the purchasing decision. For example, seventy-nine percent of online shoppers rate free shipping on returns as important, according to Accenture’s research. In another report, we found eight out of ten consumers consider the returns process or policy important when deciding whether or not to make an online purchase. In the Accenture Global Consumer Shopping Survey, when consumers were asked what they do when they find out a retailer has an inconvenient or costly returns policy, most will abandon the cart in search of a retailer that provides a better policy.
The rise of e-commerce and changing customer expectations
E-commerce is driving this change in shopping behaviour. Some of these returns have always been there like items that were damaged or not quite as the customer expected. But many of the returns happening now have grown out of new, digital behaviours.
Today’s savvy e-commerce shopper will often order multiple items (such as a sweater in four sizes) with the expectation that they’ll return those they don’t want. Savvy e-tailers are adjusting processes and policies to take advantage of these new models which is driving surprising returns growth. Online retail sales increased by 18 percent in 2016 and returns cost US retailers more than $260 billion in lost sales (about 8 percent of all purchases), according to the National Retail Federation. Clothing returns can be closer to 40 percent.
Given the market growth at stake, it is easy to see why e-tailers have evolved from considering returns a necessary evil to a key part of their business strategy. These new approaches focus on driving competitive advantage with returns as a lever to improve conversion, basket size, retention and Net Promoter Scores. Given its importance to the consumer it is easy to see why e-tailers are transforming.
Emerging Return-Centric Models
The digitisation of the consumer experience has enabled a whole new business model that incorporates returns. This plays on the convergence of a few trends:
- Disposable Digital: we used to pay $50 for a phone that would last 18 years. Now we pay $800 and hope for 18 months. The pace of digital advancement is changing our perception of longevity and even ownership. For example, The UK’s Girl Meets Dress offers customers the opportunity to order up to three dresses, wear the one they like the best, and return them all with a refund for any dresses not worn.
- Access to the New: the in-hand, immediate, always on access to information and commerce has created a “what I want, when I want” culture. Word of “the new” spreads quickly. Add the power of digital channels (social, search, etc.) and it is clear how buying has fundamentally changed. To enable the new, American eyeglasses retailer, Warby Parker, offers a Home Try-On program where customers choose and receive five frames to try on for free. The customer selects their favourite and sends them all back. The prescription lenses are added to the chosen frames, which are then mailed to the customer.
- Time Poor: the transformation of the workforce and the workday are changing buying patterns. Convenience and frictionless commerce drive conversion in a time strapped customer base. Taking advantage of this trend, Stitch Fix customers pay $20 a month for a clothing and accessories box with the option to return the whole thing or pay for what they keep. Shopping done for you in the convenience of your own home.
These returns-integrated models are driving reverse logistics growth. Those e-tailers must form strategic relationships with their reverse logistics provider because it is an essential, omni-present element of the customer experience. Post and parcel providers should explore these services under the lens of three key strategies.
In my next blog I’ll share my thoughts on these three strategies and how postal organisations can use them to drive value from returns.