Returns Management: Maximize Operations to Improve the Experience

Digital shopping has skyrocketed in popularity over the past two years, and returns have inevitably increased at a similar meteoric pace. Quick, seamless, and economical returns management is vital to success, and retailers both big and small are laser focused on improving returns and the overall shopping experience. Read on to benchmark your efforts against your peers and discover how leading retailers are investing in their returns processes to improve the customer experience and shopper journey. The increase in digital shopping has brought with it an inevitable increase in returns. For a host of reasons, shoppers have been returning orders at an increased rate, costing retailers hefty sums while simultaneously clogging overworked supply chains. Sixty percent of those surveyed report that returns volume has increased over the past two years, with 20% experiencing increases of greater than 10% (Figure 1). Just 7% of survey respondents report a dip in returns volume over the same two-year period. The returns channel that has undergone the largest increase is unfortunately the channel that hurts retailers’ bottom line the most — buy online, return online. Nearly four in 10 (38%) of retailers report that buy online, return online has experienced the volume increase (Figure 2). While the pure volume of digital orders can be tapped as the main reason for the increase in returns, what are the underlying root causes of product returns? According to survey respondents, product quality (21%) and fit (21%) not meeting pre-purchase expectations are the top reasons consumers opt to return a product. Other key causes of returns include damages, late arrival, bought to try, and the product is no longer needed. Returns have always been a challenge for retailers, but the sheer number of returns being processed has brought with it increased concerns — their impact on the customer experience high among them. RIS asked retailers for their biggest concerns regarding returns and a whopping 84% stated that the potential negative impact on the customer experience was a major worry (Figure 4). Consumer satisfaction is job-one in today’s customer-centric environment, illustrated by retailers naming a negative customer experience as their top returns concern. Happy customers are repeat customers, and ultimately profitable customers. With an eye toward the bottom line the next four concerns keeping retailers up at night were all financial in nature — process costs (47%), revenue leakage (41%), markdown costs (23%), and scrap costs (20%). While concerns surrounding the customer experience and economic impact of increased returns are well founded, overall retailers feel their returns experience is meeting industry standards. Sixty percent of those surveyed report that their customers would rate their returns experience as ‘on par’ with the competition, 30% say it would rank better than the competition, and 3% believe their experience is setting the bar (Figure 5). One surefire way to improve the returns experience is to find a way to lessen their volume — the less returns, the less chance the experience will negatively impact the shopper journey. When asked what steps they are taking to lessen returns volume retailers point to product information initiatives such as better product descriptions (50%) and better sizing information (27%) as their top action items. In addition to improving pre-sale information, retailers are also looking to reward customers that have low returns rates (10%), with another 17% limiting services and potentially blacklisting customers with high return rates. Regardless of the steps retailers are taking to lessen volume, returns are a necessary evil that retailers are rolling up their sleeves to improve. The top five steps retailers are taking to improve returns management and the overall experience are clear communication of the return policy (64%), process improvements (54%), discounts in lieu of returns (39%), encouraging store credit or exchanges (32%), and implementing a returns management solution (18%) (Figure 7). With all this activity surrounding the returns experience, is there a way to turn what has traditionally been a negative line item on the balance sheet into a sales opportunity? A little more than half of respondents (53%) believe there is. In fact, 43% are encouraging returns in store to drive impulse buying while simultaneously lessening reverse logistics expenditures (Figure 9). Successful returns management requires the orchestration of several solutions working in concert to ensure product is seamlessly and economically returned, processed, and made ready for sale. RIS asked survey takers to rank the maturity of some of the key solutions in this sophisticated dance and uncovered that a near majority of retailers (48%) are up-to-date on real-time inventory visibility, and a third (34%) have up-to-date mobile devices in the hands of distribution center (DC) workers (Figure 10). Currently, an additional 21% of respondents are in the midst of a real-time inventory visibility deployment, 11% are deploying geolocation, and 10% are installing dedicated return management software and returns analytics. Over the next 12 months 1 in 10 retailers report that they will be embarking on upgrades to their returns management software, returns analytic capabilities, mobile devices for store associates, and real-time inventory visibility. When the timeline is stretched to 24 months geolocation (11%) is the biggest investment area followed by returns management software, analytics, mobile devices in store and in the DC, and real-time inventory visibility. Methodology This research was conducted in November and December 2021. The survey was sent to retail executives at both large-scale and small regional chains. Thirty-seven percent of respondents are employed at retailers with revenue greater than $100 million, with 15% working at retailers with revenue of more than $5 billion per year. The greatest number of responses came from specialty retailers (53%), followed by grocery/convenience/drug (27%), apparel (12%), and mass market (7%). Sixty-six percent of survey takers hold director level or higher titles, with 14% hailing from the c-suite. Conclusion As digital shopping continues to grow returns inevitably have increased in lockstep. Providing a seamless returns experience has become a market necessity, but many retailers need to improve their operational and tech capabilities to ensure a smooth customer journey. Savvy retailers are taking a hard look at every aspect of the returns experience and are implementing tactics and strategies designed to not only quickly process returns but provide the opportunity for sales lift. Key Takeaways Returns on the Rise. Over the past two years 60% of respondents report that returns volume has increased, with 20% experiencing increases of greater than 10%. Thirty-eight percent of retailers report that buy online, return online has experienced the largest increase in returns. Meet Customer Expectations. Product quality (21%) and fit (21%) not meeting pre-purchase expectations are the top reasons consumers opt to return a product. Consumer Experience Above All. Eighty-four percent of retailers point to the negative impact on the customer experience as a major returns concern. Lessen Returns Volume. To decrease the sheer number of returns retailers are looking to improve product descriptions (50%) and sizing information (27%). Incentivize Low Return Levels. One in 10 retailers are rewarding and incentivizing customers with low return rates, while 17% report limiting services and potentially blacklisting customers with high return rates. Tech Investment. To improve the returns experience, 21% of retailers are deploying real-time inventory visibility, 11% are going live with geolocation, and 10% are installing dedicated returns management software.