Yields are the new growth strategy
Editor’s Note: The following is a guest article from Michael Simoncic, Managing Director, and Alfredo Lozano, Director of the Consumer and Retail Group of Alvarez & Marsal, a global professional services company. They can be reached respectively at [emailÂ protected] and [emailÂ protected]. Opinions are those of the authors.
The holiday shopping frenzy is usually followed by a tidal wave of returned merchandise, a long-standing source of lost sleep (and lost revenue) for retailers. But by making the returns process painless, transparent, and visible, retailers can eliminate âreturn anxietyâ from the customer’s shopping experience – and theirs. To achieve this, businesses can take proactive steps to prevent and reduce the need for returns by strategizing to create frictionless, convenient, and easy returns.
As we all know, the The COVID pandemic has accelerated the change in consumption shop online, resulting in 44% e-commerce growth in 2020 – this represents 21.3% of total retail sales, compared to 15.8% in 2019. This online volume shift is here to stay; E-commerce sales in 2021 are expected to increase by an additional 13.7% by the end of the year.
The dangerous news for retailers is that around 20% to 30% of products ordered online are returned, compared to just 9% in physical stores. If retailers do not tackle this problem head-on, this accelerated shift to e-commerce can have a significant negative impact on their sales and profitability, as higher returns add up to increased costs, reduced margins and revenue. lower. On the flip side, if managed optimally, returns can actually be part of a retailer’s growth strategy: easy return policies can increase sales and smart preventative tactics can reduce returns. global, helping retailers increase and maintain sales.
Retailers can think of returns as a growth strategy
A former head of customer experience at Amazon said, “Customers who have a great seamless return experience will generate more sales than a customer who has never had to return a product.” To simplify this statement, returns can boost sales.
In order to enable growth, return processes must achieve three âwinsâ: improved customer experience, cost optimization and revenue preservation. Here we would like to offer five best practices to help retailers achieve these goals.
1. Eliminate “return anxiety” from the shopping experience by making a painless return process transparent and visible
Creating a seamless, straightforward, and risk-free shopping experience will alleviate customer worries. Communicating about the simplicity of returns as part of the shopping experience will help them buy with confidence. For example, offer free returns and free remake guarantees on every product page.
2. Preventing Return Losses: Take proactive steps to reduce the need for returns using predictive return analytics
Minimize the customer need returning products can contribute to a better customer experience and to cost optimization. Historically, the two main reasons for online returns are an item that arrives damaged or broken and a poor or misleading item description. To avoid this, retailers must have dedicated process owners who continuously perform return analysis, identify top reasons for returns, monitor customer reviews, and proactively identify and correct the root causes of returns.
Some ways to avoid feedback for the most common issues include using augmented reality and âscale to sizeâ notices; evaluate and improve packaging to reduce returns due to damage; and establish clear guidelines for accurate product descriptions and images.
3. Create frictionless, convenient and easy returns
It is now considered a tabletop issue to offer customers different return options (return by mail, in store, drop off, pick up, etc.) to create an easy returns process. Make sure you don’t include any boxes or labels to drop in multiple places – the more the merrier. Give customers a long window of time to complete their returns – retailers who have increased their return window length from 30 to 90 days have saw a reduction in the return rate. Make digital return instructions simple and easily accessible. The icing on the cake of customer satisfaction is to include a prepaid label and free return policy; also offering FThe last refund or instant credit will score big.
4. Optimize reverse logistics and speed to make the product available for sale faster
Shipping returns and processing at distribution centers can be costly. To optimise reverse logistics and making products available for sale again quickly are key ways to optimize costs and preserve margins. Retailers can use a combination of solutions to enable faster and cheaper returns processing. Examples include facilitating direct-to-store return – Nordstrom encourages return-to-store by adding contactless curbside return and conveniently located return kiosks, reducing the cost of the âfirst mileâ.
Another way to make returns more convenient is to consolidate or consolidate returns in locations close to customers – companies like Happy Return and Narvar are helping retailers save on reverse logistics by providing thousands of drop-off points throughout. the country. Facilitating the rapid return of resalable stocks to stores by allowing the rapid repackaging of salable stocks to be put back into stock reduces the loss of margin.
Some retailers will have a dedicated returns store, as well as fulfillment center processes and flows – using a returns consolidation center and establishing clear guidelines can help determine and properly execute the return and to make the product available for sale or rejection. Finally, some retailers will use return cost analysis to determine if the return cost is greater than the clearance / resale value – in those cases, they would consider letting the customer keep an item at a lower cost or not resellable.
5. Save the sale!
Preserving income is the key to leveraging returns as a growth strategy. By using some of these innovative approaches, retailers can preserve a quick sale and redemption in the future. Here are some examples of best practice approaches to trigger a buyback: Encourage in-store returns – 71% of in-store returns result in Buy It Now; personalize returns with personalized offers for replacement or other items to be purchased as part of the returns process; and offer instant credits, bonus credits or discounts for same day purchases, which has been proven to incentivize exchanges and purchases as well as returns.
Not all retailers are created equal
As all businesses need to embrace new technologies and solutions in a digitally driven environment, different retailers need a different mix of solutions to leverage returns as a strategy for growth. Retailers with a large footprint are often well positioned for convenience, cost optimization and revenue growth by encouraging more in-store returns – a pre-pandemic study has shown that 87% of consumers preferred to return in-store, while 71% purchased other items when they returned to the store.
Retailers with smaller footprints, however, may need to leverage other solutions for a profitable and revenue-generating return strategy. Using a network of drop-off points for unlabeled / unpackaged returns and adopting predictive analytics technologies for prevention are just a few examples of how they can be successful as well. With the pandemic accelerating use of digital sales channels, all retailers are poised to take advantage of this change as a catalyst for growth by deploying a new set of return practices, technologies and solutions in a customer-centric environment. digital.