Returns are bad.
They’re often the result (or cause!) of a negative customer experience, they’re logistical nightmares, and they’re costly for physical and ecommerce stores alike.
Retailers have no choice but to accept them, and stricter return policies have historically driven customers away. So what can you do?
One of the most common approaches has been to implement Buy Online, Return In Store (BORIS) policies. As of November 2014, more than 70% of “big-box” retailers accepted in-store returns for online purchases.
How did returns become such an important part of retail success? It all starts with customer experience.
People Prefer In-Store Returns
Regardless of whether they purchased items in a store or online, the large majority of customers – roughly 83% – prefer to return items to physical stores.
This strong preference, in turn, influences where some customers make the initial purchase –in a survey by Ripen Ecommerce, 6.5% of consumers listed “easier/cheaper returns” as the factor that would most influence them to buy in stores rather than online.
That may not sound like a huge number, but it reveals something important: namely, that many consumers still strongly associate store returns with in-store purchases, even though most retailers now accept returns of online sales.
It also highlights how strongly consumers associate returns with customer service. It may seem to retailers like free return shipping would be more convenient for the customer, but everything from wait time for exchanges to privacy concerns or confusion about the process may affect consumer choice.
More Touch Points = More Purchases
So your customers prefer in-store returns. What’s the potential benefit to your retail chain?
For one thing, anything that brings customers into your stores can lead to additional purchases, and additional purchases can go a long way to offset the cost of returns. When faced with appealing product displays in-store, customers may also choose an exchange rather than a simple return. In short, multichannel customers are likely more valuable to you than single-channel ones.
While multichannel customers benefit every channel, they seem to be of particular value to retail store locations. A recent A.T. Kearney survey found that 40% of respondents say they spend more than they’d planned to in stores, compared with just 25% who say they do so online.
One Caveat: Returns Are Expensive for Retailers
A return means that a consumer did not want something purchased from you, and that’s not ideal for any of the parties involved – but particularly for the retailer.
The average cost of “reverse logistics” for retailers of consumer goods is about 8.1% of total sales (including the value of the goods). Returns could be costing you nearly 10% of your total sales – that’s a number that will eat into net profit!
When it comes to store returns of online purchases, the numbers don’t look any better. Buying items online sight unseen makes consumers between 5% and 30% more likely to return their purchases.
To manage the customer experience side of this flood of returns, many retailers have initiated free return shipping for online orders, which is a somewhat tidy but costly approach.
However, if you want to cater to your customer’s preference for in-store returns, you could face a different set of costs. Online purchases returned to retail locations are often then shipped to consolidation facilities to be sorted. A portion of those returns is no longer saleable, and the rest still needs to be processed and reallocated – not a cheap prospect.
How can you reduce reverse logistics costs and gain the customer experience benefits of in-store returns?
Finding “Brick-and-Click” Efficiencies for Returns
We keep writing about how brands need to stop thinking about brick-and-mortar retail sales and ecommerce sales as separate categories, and this is a great example of what we mean.
Sure, you can and should give your customers the tools they need to make the best purchase the first time around. You should also find and address expensive weaknesses in your post-return procedures.
But there’s also a solution that adds another layer of value to the customer experience – pairing a BORIS policy with a buy online, pickup in store (BOPIS) policy.
There are lots of benefits to BOPIS policies, but one of the most lucrative for stores is that if the item a customer purchased online for in-store pickup isn’t what they were expecting, they can return it right there. The item travels at most a few hundred feet – from the shelf to the customer service desk, and back again.
This method is gaining popularity among the retail giants. As I mentioned above, the large majority of big-box retailers accept in-store returns for online purchases – and about half also offer Buy Online, Pickup In Store (BOPIS) purchases.
There’s very little cost to the retail brand as a whole, as the item didn’t have to be shipped from a fulfillment center to the consumer or shipped to the return consolidation facility for sorting and restocking or disposal. Perhaps best of all, the brand doesn’t have to subsidize free return shipping, which consumers are coming to expect.
Luckily, this approach is also more convenient for many of your customers. They can pick up an item quickly without waiting for shipping, and if they don’t want it, return it easily and simply without shipping labels or trips to post office.
If all of this seems like a lot of extra effort to you, let me leave you with one more statistic – nearly one third of all online sales get returned.
I think it’s about time to take your Buy Online, Return in Store policy seriously, don’t you?