How to Remain Profitable in the Face of Ever-Growing Customer Return Rates

Businesses love high trading periods. Customers are browsing more, buying more and spending more, so you can just sit back and watch the money roll in… But you forgot one thing: customers are also returning more. Imagine hearing that up to 40% of products sold in your online store are diverted back to the warehouse through returns. If you are an eCommerce retailer, this is the reality, and it’s not something you can ignore.

What did you send back over the Christmas period, for example? If, like the rest of the world, you only returned: one t-shirt which was the wrong size, or one gift that you wished had just been cash or those ugly socks from grandma, then congratulations, you contributed to roughly £7bn in lost profits for businesses across the UK!

From the perspective of a business owner, it begs the question: why offer returns at all if it’s so bad for the bottom line?

Well, in short, it’s not. A refined returns and refunds process will save you money, despite what you’ve just read. The reality is that by listening to what the customer wants (a quick and easy returns process), you could actually earn a loyal customer and negate any ‘lost’ profits from refunds. In fact, 73% of online shoppers say the returns experience directly influences their likelihood of buying from a retailer again.

Okay, so you’re offering returns and refunds to your customers because you hear it can produce customer loyalty and repeat sales. Now let’s look at some specific ways you can optimise your operations to be even more profitable.

Ship quick and refund quicker

Whether it be a last-minute gift or an outfit for a specific event, we have all been in a situation where we need to receive an online purchase quickly. If your customer requires fast shipping and you don’t offer it, guess what: they will shop elsewhere! Offering expedited shipping means fewer touchpoints, so the product is less likely to get damaged or lost and ultimately has less chance of returning it. If these hidden savings aren’t enough to convince you, maybe the prospect of more cold hard cash will. About 75% of shoppers are willing to pay more for expedited shipping, so pick your price point and get that package sent ASAP!

If the customer does eventually request a return, it’s best to process it as quickly as possible. According to Rebound, 25% of shoppers cite delays related to their returns as contributing to a negative experience. In order to process the return efficiently, disparate systems just won’t do: you want everything to be managed in one place. A cloud-based solution can help ensure returns are quickly processed so that items are immediately returned to available-to-promise (ATP) inventory and available for resale. Automating this process with an ERP such as NetSuite will save time, money and errors, which means a happy (hopefully returning) customer.

Improve inventory visibility

If you’re still manually processing each return as it comes in or using several different systems to do so, reporting errors are sure to be popping up left, right and centre. The worst part is that you might not even realise, but there are some clear signs that your stock counting processes are outdated and probably disparate. Perhaps you’ve sold an item you don’t even have in stock? Or maybe your website has been showing an item as out-of-stock, but it was sitting in your warehouse the whole time following a return? Imagine if somebody wanted to buy that…

The ultimate goal in receiving any return is to get it back on the shelf for resale at the highest price-point possible, and, depending on your vertical, this is very achievable if you have high visibility over your stock and the returns life cycle. About 80% of returned clothing, for example, is likely to be resold without significant work but knowing the product’s status is imperative so that as soon as it is ready, it can be tagged as available to resell. So what’s the best solution? NetSuite’s Returns Management Software is just one NS feature that improves inventory visibility, specifically relating to the returns process. NetSuite gives companies a complete overview of operations, even across multiple locations. The system allows you to accept returns and exchanges from all channels, manage how the return will be processed and set automated rules – refining the returns process. With real-time reporting, the whole process is streamlined, and you will have access to accurate product and inventory data throughout the returns life-cycle.

Invest in your Returned Merchandise Authorization (RMA) process

Did you know that many shoppers buy several items with the explicit plan to immediately return the ones they don’t want? 62% of consumers engage in this behaviour, known as “bracketing,” generally with clothing items of different sizes. Another unfortunate by-product of keeping all your loyal customers happy is the opportunity for some consumers to abuse the system. Consumer behaviours such as bracketing can strain operations, particularly when trying to get items resold as quickly as possible. Establishing a refined RMA process is very important to ensure that returns are inspected and processed appropriately whilst determining whether it can be resold or not.

As if the process wasn’t complicated enough, there is one taboo topic that no one likes to talk about when it comes to returns: fraud.

An efficient RMA process should also include data stored on the customers who are returning products, not just the product itself. NetSuite’s order management system tracks customer purchases and greatly increases how easily a company can validate returns and prevent fraud. With customer purchases being recorded in the system, you can easily assess and flag customers who seem to be abusing the returns policy.