Is there such a thing as the perfect returns policy?

It’s that time of year when retailers are knee deep in the annual challenge of returns following peak trade from Black Friday through to Boxing Day sales. It’s not just the pain of the admin, the sight of the cash flowing back out of the bank in refunds when all you want is to be using your peak season momentum to fly into the New Year at full speed, that can be particularly disheartening.

It can feel like a traffic jam on the motorway when the other lane is completely clear. 

It’s not unusual for some retailers to experience negative sales on their daily sales charts too, so if you are seeing this then you’re not alone. 

Returns are a fact of life in the world of eCommerce, so how do we learn to live with them and how can we do it better for next year?

For each million pounds of revenue, a 1% improvement in your returns rate will equate to a £10,000 benefit to your bottom line, plus all your other variable cost ratios will improve. 

Sounds tempting? It should…

If there is one thing you should be doing this year to add considerable profit to your bottom line, moving the needle on your returns rate is right up there.

It’s a problem worth solving. So let’s have a go.

First thing to do is get your accounting right. Returns made in January relate to sales in December. Netting the two off in the same month is just wrong and always makes your performance in January look worse than it is. Pretty much every eCommerce CMS that we’ve seen gets this wrong and presents the data in real time.

Looking at false and misleading financial data can then lead to management making wrong decisions. Pulling back on marketing investment for example when the one thing you need to encourage in January is your demand. High levels of returns in January is a problem baked in from decisions made in November/December, don’t compound those errors by making poor decisions in January.

From an accounting perspective you should be providing for those returns in your December income at your long term returns ratio. You will then be able to release this income in January when the returns hit. Ask your accountant to clarify this if you need to.

It will help you focus on the genuine challenges of the new year, reassured by the fact you’ve already accounted for the mounting returns being dropped off every morning.

Perhaps one of the best ways to reduce returns is by making sure the customer loves the product and the service they have just received. A more disgruntled customer, who perhaps received an unloved package late, is far less inclined to feel any warmth towards the product itself and the retailer.

Your job as an online retailer is not finished until the customer decides to keep their order. What can you do to make sure that the experience from the time they convert at checkout is a warm and fuzzy one?

When you get the brain juices flowing there’s loads to go at here. And it’s essentially the science of persuasion. How can you send those subliminal messages to the customer that they want to keep their order? 

Quick despatch, tracking information, fast delivery, beautiful and thoughtfully designed packaging and in-bag goodies all help, and how about a post-purchase call from customer service to check they received everything ok?

Yes, you might think that this is all very costly but remember what you could save for every 1% off your returns bill…

This is probably one of the areas I’m most passionate about. Turning a cost-centre into a profit driver. Part of selling someone something is that they are happy with their purchase. There is nothing more disappointing as a customer than receiving your order and it not being as expected.

They are instantly filled with the disappointment that they can’t wear the jacket they’ve just bought for this weekend or the dress for that wedding. Not only have they got to come up with another option, they are left with the mundane task of having to send the item back and then wait for a refund.

This is where the retailer gets to become the superhero in the story. You must have a “don’t worry we’ll take care of it approach” by making it super easy for the customer.

The worst returns ratios I’ve seen are most commonly found with retailers who are scared of returns, who hate the idea that a customer might want a refund. By embracing returns and helping the customer recover from the disappointment of having to return an item, you are building brand loyalty with that customer which will repay tenfold over time. 

Shopify estimates that two-thirds of customers review the returns policy before making a purchase. By having restrictive returns policies and poor customer support, you are just damaging your brand and your conversion rate. It is always a massive red flag for me too, brands who do not back themselves that you’ll want to keep the product and you’ll be happy with your purchase tend to be the ones to avoid.

Check out Thread.com who in my opinion have this nailed. They have a 100 days returns policy, which combined with Klarna (pay later method) means that customers have generous time to work out whether they are keeping the product or not and the balance of the money just nets off in their Klarna account.

Thread also don’t allow exchanges, which I think is a great idea. Exchanges are always the hardest and most laborious type of order to deal with. By the time exchange requests are received, what was in stock may have gone out of stock, thus disappointing the customer further. The best case for customers is that if the size they need is available is to order it there and then, safe in the knowledge their refund will be processed quickly. To commit to this you need to maintain a slick returns process at all times and some confidence that the loss of the exchange doesn’t lose you net sales.                          

If you get this process right, it stands out against the archaic returns policies and gives you an edge over competitors.

Moral of the story is, if you back your product, back it up with a returns policy to match. It will create value for you and not cause harm. The volume of your returns might increase but not as much as your average order value and your conversion rates, which means your returns rate actually decreases.

The single biggest impact you can have on your returns rate in the short term is by improving your onsite information. In a nutshell, make sure that your customer is adding the right item for them to their basket.

Sizing

In the world of fashion retail, 75% of the time sizing means fit.

Work very hard at getting the right fit information about your product on each product page. This however, does not mean having a link to a size guide that contains all possible size information about all products on your website. This screams lazy and is just telling the customer you’re not bothered, so avoid that by removing any generic size guides from your website. 

Make the size guides you have as layered as possible with categories and where necessary by style, and position this information on product pages. Let the value of the product guide you. If you want to sell an item that is anything more than $100 for example, put the effort in to give it its own size guide. The value will be there.

Getting the right sizing also means consistency of sizing across categories. If a customer knows they wear a large t-shirt, they will somewhat expect to wear a large jumper, overshirt and jacket. Don’t make your customers second guess what they might be from season to season. Using standard fit-models that don’t change throughout production and seasons will mean your stock is landing consistently from your suppliers and your customers will have faith in what they are ordering.

Reviews are another great way of directing your potential customers to the right product by utilising the experience of your actual customers.

Reviews from your customers about your products should be good (if not then there are other problems to address before returns!) and they will contain key information about the product that you may not have thought to add elsewhere. Little nuggets of information shared in customer reviews is another great way of signposting customers to the product that’s right for them.

Another red flag moment is when a site doesn’t have reviews. Why doesn’t the retailer back themselves to allow customers to comment, what are they hiding?

Embracing reviews will contribute to your rich website content, boost your conversion rate and reduce your returns, it’s one of those rare win-wins!

This blog post is by no means meant to be an exhaustive list of what is required to build your perfect returns policy but from my experience in the industry, these points will certainly help form the bedrock of what can ultimately become something you can use to your competitive advantage. 

The one overarching thought I want to leave you with is that retailers must embrace the challenge of returns, not run from it. A ‘return’ is the retailer’s problem not the customers; be on the front foot not the back foot watch your bottom line improve significantly.