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Finding a Silver Lining in Online Returns

Whether retailers are gearing up for the upcoming holiday season, or doing business as usual, a well-planned returns strategy pays off.

Jim Brill | UPS

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Transparent communication about returns policies can improve conversion rates and bolster profit.

Here’s something flying beneath the radar of the much-publicized growth in e-commerce: Return rates are three times higher for online purchases. And apparel is returned more than 30 percent of the time.

The dollars involved are staggering: Of $3.2 trillion in total retail sales for 2014, returns were valued at $284 billion – that’s almost nine percent of all transactions.

To put this in perspective, if returns were a retailer, it would rank No. 2 on the Stores 2015 Top 100 retailers list, behind No. 1 Wal-Mart – and three times larger than Kroger, the current No. 2 retailer.

That’s why it’s important for online sellers to get their returns policies right. Doing so not only reduces cost, but also improves the overall customer experience.

In the 2015 UPS Pulse of the Online Shopper study, 88 percent of more than 5,100 frequent online shoppers told us they review a retailer’s returns policy during their online visit. Two in three do so before purchasing anything.

Roughly 15 percent abandon their shopping cart when a returns policy is unclear.

What is clear: Transparent communication about returns policies can improve conversion rates and bolster profit.

[Also on Longitudes: A Power Shift in Retail]

Click here to download study

Click here to download study

Who doesn’t like free and easy?

Make sure your returns policy is simple, short and expressed in customer-friendly you and I language, not legalese.

Make sure your policy is easy to find, along with a returns link on the home page.

Include a FAQ section, as well as an 800-number or live chat function. State clearly who pays for what.

Consumers value returns. Sixty-six percent of those surveyed called for free shipping on returns, making it the top demand in the UPS study. But a no-questions-asked, hassle-free policy ranked second at 58 percent. And easy-to-print or in-the-box return labels ranked third at 47 percent.

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You could also include a return label in the package or offer a printable label on your website.

Consider displaying your carrier’s tracking links and if appropriate for your product category, offer prepaid labels.

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For many, an immediate refund is incentive enough to visit a brick-and-mortar store.

Flexibility is a must for today’s shopper, and in-store returns offer excellent profit potential for online retailers with a brick-and-mortar footprint.

In the study, more than 60 percent of online shoppers who have returned an online purchase in the past year prefer returning items to a nearby store. Of those, nearly three quarters of respondents made a new purchase while in the store. Less than 40 percent prefer to ship back to the retailer.

A July 2015 UPS study, Rethinking Online Returns, found that of the websites from the Internet Retailer Top 500 Guide, just 32 percent offer some form of omnichannel or store-based returns.

Many are missing a clear opportunity to drive customer satisfaction and additional sales.

Retailers can also encourage customers to visit a local store when returning purchases.

For example, when a customer accesses the return-label printing menu, why not show them a map and ask, Would you rather visit a store – there’s one 2.5 miles from you?

For many, an immediate refund is incentive enough to visit a brick-and-mortar store.

[Also on Longitudes: 5 Ways to Battle Retail Goliaths]

In the loop

With refunds, retailers need to set clear expectations.

For example, 45 percent want to see an automatic refund once the retailer receives their items, and 44 percent want an email confirming receipt and crediting of the item.

At UPS, we have integrated technology that accelerates the refund process, notifying the retailer seconds after a return label is scanned into our system.

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With refunds, retailers need to set clear expectations.

That means the retailer no longer needs to wait for a package to arrive at their loading dock to credit the consumer’s account.

According to a recent Wall Street Journal article, accelerating the refund process increases the repurchase rate for those consumers.

Preventing returns is a good strategy, too.

Just a handful of top online retailers provide content that educates shoppers, makes returns easier or prevents them by offering product instructions or installation and trouble-shooting advice. Doing so would surely improve the odds of preserving the sale in the first place.

A 2012 academic study published by the American Marketing Association revealed that when retailers provide shoppers with a free, no-fault returns process, the payoff in loyalty more than offsets the added costs.

These retailers enjoyed a significant upswing in purchases from shoppers. So while it may seem like a tough transactional pill to swallow, in the long-term, online retailers can profit by offering this extra dimension of customer service.

At a time when retailers are looking for the slightest of competitive advantages, a smart, customer-friendly returns policy and process is an often-overlooked silver lining. goldbrown2

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Jim Brill is the Reverse Logistics Marketing Manager at UPS. In his 28 years with UPS, Jim has worked in Business Development, Sales and Marketing, gaining a deep understanding of UPS's business units, operations and systems.

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Reprinted with permission of Longitudes, the UPS blog devoted to the trends shaping the global economy.

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