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Dec

Love vs. Hate: Returns can be good for business

You hate returns. Every retailer would be happier if people just stopped returning. But that isn’t going to happen. In fact, in ecommerce, returns rates continue to rise as retailers use lenient return policies to lure in first-time customers or those hesitant to purchase online. This “necessary evil” can double as an opportunity to gain valuable insights into shopper preferences and the overall performance of your business. Successful e-tailers are using returns data as their finger on the pulse of a chaotic marketplace.

Returns can be a fantastic barometer for business performance. In fact, knowing the true value of returns can serve as a powerful gauge for identifying where you can make positive, proactive changes in your business. Especially in ecommerce, data from returns can offer game-changing visibility into product performance, customer habits, loyalty and satisfaction. That kind of power can not only boost net sales, but help stabilize your business in the long term.

Consider what returns can tell you about your business:

  • Which categories, products or SKUs make your customers the happiest?
  • What products sell well but generate more returns?
  • Why do customers return some products in a category more than others?
  • Is there a quality issue with your product or its packaging that can be easily solved?
  • Is your returns process both cost-effective and shopper-friendly?
  • Which products cost you more than they make you?
  • Does your returns policy attract customers or run them off?

There are some simple, cost-effective ways to leverage returns to help your business while delivering the experience your customers demand.

Listen to what returns are trying to tell you

You have to capture data on returned purchases. If you aren’t getting information on every single return, you’re squandering a huge opportunity. Take “reason for return” as a prime example. A major retailer carried a high-selling popular spray product, but they were getting many units returned. When the retailer checked the data to see why, they found out the caps didn’t stay on the can very well. Returned spray cans can’t be restocked and have to be handled as hazardous waste, which adds additional cost. This popular product, which sold well, was on the brink of being dropped by the retailer, representing potential loss of a profitable product for the retailer and a large retail sales base for the manufacturer.

Instead of discontinuing the product, the retailer shared this information with the vendor, who was able to make a quick adjustment to how the caps were manufactured. As a result: sales stayed up and returns dropped to more reasonable, profitable levels. Further, as expected, none of the new returns were due to the cap issue.

The retailer was able to do this simply because their returns process included data capture which included, among other attributes, the reason for return.

Returns data can provide an ongoing voice of the customer, telling you everything from necessary operational improvements to insights that lead to product improvement and innovation.

Returns can tell you a lot that sales don’t

Apparel sellers who use software to track data on returns are able to tell, for example, which colors, styles, and sizes of their products get returned most often. That’s a valuable insight in an ecommerce environment in which people buy several sizes or colors with the intention of returning one or more of the items that don’t fit, match, etc.

Some e-tailers have decided to embrace that shopping practice and make it as easy as possible to return purchases. While this practice may look like a customer-satisfaction play as a competitive mandate, there’s far more to be gained than just appealing to customers.

Smart e-tailers pay very close attention to the shopper insights that they can garner from returns. They watch for trends, consistencies, inconsistencies, and comparative analyses to guide important decisions. Returns data can be invaluable in better informing such things as product performance, category performance, vendor performance, future orders, promotions, product mix, which SKUs do/don’t work; the list is long and strong.

How valuable is your customer?

Another value of returns data is that it can give you a more complete picture of your highest-value customers. Can you tell the difference between a shopper who is high-value and one who is high-cost? Some shoppers return a lot of purchases but remain high-value because of the net purchases they make. When you can tell the difference between a high-value, loyal customer and a high-cost, serial returner, you can take action directly toward your bottom line: reward the high-value shopper and dissuade the serial returner.

Think of it this way: it is one thing to judge product performance based on what sells or doesn’t. Adding returns data to that mix is real-life information about products that shoppers did buy and didn’t keep. Returns data brings insight into products that shoppers actually had in hand and decided to send back. Without convening a focus group (expensive and limited) or sending out a survey (unreliable), you can’t get that kind of insight anywhere else.

Maximizing value recovery on returns

What do you do with all those returns that cannot be resold? Or with that excess inventory at the end of a season? You have options beyond clearance sales that pit your full-price inventory against heavily discounted items.

With the right assessment on returns and excess inventory, you can decide whether it can go back up for sale, be donated, liquidated or sent to the landfill. Donation has a societal value, of course, and a tax value as well, but neither of those take care of your immediate cash flow picture. Liquidation, on the other hand, still makes some value recovery possible.

The size of the secondary market has grown a massive 79% since 2008. At $554 trillion and growing, secondary markets are 3.07% of the United States’ GDP, according to Zac Rogers, PhD of Colorado State University. Secondary markets have been deemed a competitive advantage by more than 45% of U.S. firms who sell through them.

Some may shy away from liquidation because of the perceived low return but it has several advantages. One of those advantages is a liquidation partner can help control where and in what condition your products end up being sold. Tapping into reputable retailers and/or international markets will protect your brand and your pricing power.

The complete picture

Don’t get lost in the smaller picture. Capturing data on returns is about much more than just that one aspect of your business. When you consider that returns cost retailers about 8% of sales, the perspective changes – an 8% chunk of sales can be the difference between success and failure. Having a clear data driven strategy for managing your returns will separate you from your competitors. It will enable a superior customer experience and deliver the best bottom line results for your business.

 

Inmar helps retailers and manufacturers boost revenue through easy-to-use software and analytics to better inform business decisions:

Promotions: Coupon programs and digital promotions, loyalty programs to drive sales, influence shopper behavior and build brand

Supply Chain: Software, analytics and processing of product returns and reverse logistics for retail and ecommerce; supply chain optimization, both forward and reverse

Inmar’s intelligent commerce platforms empower brands and retailers to fully leverage the complex opportunities for revenue growth that abound in the disruptive reality that is today’s retail. From mobile-enabled personalized promotions to omni-channel returns management, our proprietary, data-driven solutions enable enhanced audience engagement, activation and retention throughout the shopper journey – helping Inmar’s +1600 manufacturer and retail clients build brand, grow share and keep customers.

 

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If you enjoyed this content, consider joining us at PROSPER Show, March 13-14, 2018 at the Las Vegas Convention Center. 
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