The Challenge of Returns in E-Commerce

In a perfect world, the life cycle of an e-commerce transaction would end with a satisfied customer's purchase, maybe with a positive review for good measure.

But sometimes, for one reason or another, a customer will need to make a return. Last year, consumers returned around 14.5% of total retail sales, worth a total of $743 billion. The National Retail Federation estimates that returns in 2023 led to $400 billion in lost salesfor U.S. retailers.

The logistics and return process have the potential to make or break a customer's view of your brand and even their likelihood of making a future purchase. They can damage your business's reputation and lead to missed sales.

At Nogin, we want to help your e-commerce business maximize sales rather than miss out due to something that's in your control. Read on to find out more about best practices in reverse logistics and how Nogin can help you generate fewer returns and make the most of the ones that aren't avoidable.

Why do people make returns?

In 2023, for every $1 billion in sales, the average retailer in the U.S. incurred $145 million in returns. Recent data showsthat the return rate for online transactions was three times higher than in-store purchases. But why?

There are many reasons shoppers return items after making a purchase. A few of the top reasonsinclude:

• Overbuying/buyer's remorse-Over 85%of consumers who overbuy online do so to try on their items at home and return what they don't want.
• Item didn't fit - Sometimes, this happens due to buyer error, such as purchasing the wrong size. However, if customers lack confidence in how your product will fit, they are more likely to return it.
• Finding a better price somewhere else - In the current economy, providing high value for what customers are paying is more important than ever. If they find a better deal somewhere else, customers might make a return to buy the same exact product from a different seller. This can be especially frustrating if you are selling your products through different marketplaces and your customers return and rebuy because you don't have consistent pricing or promotions (see how Nogin can help).

Additionally, return rates spike during the holidays. In the 2023 holiday season, with nearly $1 trillion in holiday e-commerce sales, return rates hovered just above 15% - equaling an estimated $150 billion in lost revenue.

5 ways to reduce returns and increase customer satisfaction

In the e-commerce industry, certain types of returns are inevitable, such as when gifts are purchased that recipients do not want to keep. But as a brand leader, there are a few strategies you can use to mitigate the number of returns you see - and for those inevitable purchases that just didn't work out for one reason or another, there are ways to optimize reverse logistics in a way that keeps customers coming back.

1. Create a clear and comprehensive return policy

82% of respondents in a recent surveysaid that when shopping online, a retailer's return policy will influence whether or not they make a purchase.

Additionally, 87% of consumerswould consider not buying from a retailer that didn't offer free returns.

Your return policy should be easy to find and include everything your customer needs to know just in case their purchase doesn't work out, including:

• Return time frame
• Item condition
• Refund process (including how much will be refunded after a certain time frame, if applicable)'
• Any exceptions/exclusions
  

Additionally, it's best to keep legal jargon out of your return policy-the average customer doesn't want to have to hire a lawyer to decipher your terms and conditions before they make a purchase on your site. It's also best practice to maintain a friendly and positive tone in your return policy to ensure customers have a favorable association with your brand.

Lastly, put your return policy in an easy-to-find location and link to it in the footer of your site.

Tip: Shopify has a return policy templatewhere you can easily plug in information specific to your brand.

2. Show and tell

There's a lot of uncertainty involved in a typical e-commerce purchase. Compared to a brick-and-mortar store, an e-commerce retailer has to work a lot harder to give an accurate picture of what their product is and what it will look like in consumers' day-to-day lives.

To combat returns based on unmet expectations, it's vital to show and tell all of your product's details. Include stellar product descriptions and product photos, and incorporate virtual try-on technology to reduce the number of returns you see, especially for items like clothing and furniture.

3. Stay in touch

Your customers' impression of the return process can significantly shape their perception of your brand. One of the best ways to keep the brand-customer relationship strong is through frequent updates and communication on the return process.

Instead of making them log into a separate app each time they want a return update, meet your customers where they already are through email, SMS or messenger. You can also use these communications as touch points to get customer feedback on the ease and function of both the return and the initial purchase, which can be filed away for personalization and fine-tuning of your internal processes.

4. Identify "frequent returners" to limit the cost to your business

Offering free returns can increase customer loyalty - but over time, a customer making a lot of free returns can pose a significant cost to your business.

To mitigate that risk, rely on customer segmentation to target specific products to specific customers using their historical transaction data. By showing them more of what they might like based on their individual preferences, you increase the likelihood of them keeping what they purchase. Additionally, Nogin's customer segmentation feature enables you to identify frequent returners and limit their free return privileges after a certain threshold.

5. Make returns easy

Give your customers flexibility with return options like in-store returns and drop-off points. Nogin partners with Happy Returnsto streamline this process, offering a vast network of drop-off points to increase convenience and reduce packaging waste. Plus, Happy Returns offers insights through advanced data analytics to help you understand customer return patterns preferences, which can ultimately reduce the number of returns.

By simplifying the return process, you can transform a negative experience into a positive one, boosting customer loyalty and encouraging repeat purchases.

Limit returns and increase customer satisfaction with Nogin

Nogin's enterprise e-commerce solutions can help you significantly decrease returns through better product photography and descriptions, uniform pricing across marketplaces, AI-powered personalization and customer segmentation, ensuring the right products meet the right customers.

Set up a free, no-obligation consultation with us today to learn more.

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