The ecommerce market in the US is the second largest in the world, generating total revenue of $599 billion last year. The market grew by 11% through 2021, with ecommerce in the US contributing to global growth of 29% during the same period.
This trend has largely continued through the first half of this year, as ecommerce becomes increasingly dominant and retailers look to convert a larger number of online and mobile transactions.
Of course, this also causes potential issues in terms of scale and returns, with retailers seeing approximately 16.6% of total merchandise purchased returned in 2021. This figure increased markedly from just 10.6% in 2020, so there's a clear challenge for retailers to deal with.
But how can your ecommerce business minimise and manage returns in the digital age? Here are some ideas to keep in mind!
1. List and Present Your Products Accurately
When striving to manage your returns more efficiently, it's important to adopt a proactive mindset and minimise the number of products that are sent back by customers in the first place. This type of preventative measure can help to streamline your venture and minimise the cost of returns, while it starts with listing and presenting your products as accurately as possible online.
In simple terms, this means ensuring that every listed product includes a concise and accurate description, and ideally one that takes the item's core features and translates these into actionable benefits for consumers.
You'll also need to incorporate the product's dimensions, particularly its height, length and weight, alongside the materials used and (where appropriate) its core ingredients.
Of course, combining all of this information in a character restricted and concise description can be challenging, so you may want to outsource the task to a copywriting expert who's able to achieve this on your behalf and create a consistent approach across all of your products.
The use of high quality product images can also be helpful, particularly when selling items that rely on having a pleasing aesthetic (such as clothes, fashion accessories or furniture).
Ultimately, product images should be sharp and clear, while you should also feature multiple pictures that display the item from multiple angles.
From a visual perspective, you should also consider featuring product videos. These can take the form of product demonstrations or marketing aids depending on the nature of what you're trying to sell, so long as they add value and help potential customers to familiarise themselves with a particular product and make a more informed decision.
2. Understand the Actual Cost of Returns
No matter how proactive you are when managing your ecommerce business and attempting to minimise returns, it's virtually impossible to stop customers from returning items completely.
Now, while you may respond to this by prioritising customer satisfaction through the development of a favourable and generous returns policy, it's crucial that you factor in the financial cost of returns if you're to strike the ideal commercial balance.
For example, you may initially decide to offer free returns in an attempt to please customers. This will incur an accumulative financial cost, however, depending on your rate of return and how this increases as you continue to scale.
Prominent returns costs include reverse shipping and tracking, while you'll also need to factor in labour elements such as the number of hours taken to manage returns (from processing requests through email or phone to restocking products and organising logistics).
In some cases, such costs can exceed the value of buying a new wholesale product, creating a scenario where it would be more cost-effective to issue a refund and let the customer keep the original item.
Sure, you can simply cover these costs by charging return shipping fees to customers, but most of us won't purchase from an online store that engages in this practice.
So, the best course of action is to understand the precise cost of returns in relation to your business, before creating a detailed (and hopefully clear) policy that simultaneously incentivises customers and optimises your bottom line.
3. Analyse Your Returns
There may be many reasons why customers choose to return items, from faults or damage incurred during transit to a simple desire to change their mind.
Regardless, each return offers a unique opportunity to learn about your products and how they're perceived by customers, and widespread analysis of this data can deliver a number of benefits going forward.
For example, you may begin to observe recurring faults or issues that highlight a consistent design flaw. Similarly, you could receive consistent feedback that a product simply isn't fit for purpose, allowing you to identify one or two improvements that make them far more successful going forward.
As part of your analysis, try to break the information down into numerous variables, such as the type of product returned and its attributes.
This is an excellent way of identifying common factors and issues, which may help to manage and minimise returns in the future. It's also more crucial in some sectors than others, with more than 56% of clothing and shoes purchased globally returned annually.
Interestingly, some brands have also unlocked methods of leveraging returns as revenue generators. Take Zappos, for example, which broke new ground by offering a 365-day, free two-way shipping and return policy.
Through this model, customers were invited to order shoes and try them on in the comfort of their own home without any upfront cost. If they're not happy, they can simply return the shoes for free too, affording them total flexibility about how they shop online and select products.
This guarantees unique and engaging customer service, which distinguishes the brand and compels customers to spend more of their money over time. This is borne out by the fact that Zappos' consumers with the highest return rates also tend to be the highest spenders, suggesting that the brand's innovative model is helping to increase revenue and customer loyalty.
Just like the advent of free shipping, this highlights how returns policies can be key differentiators for your brand and encourage customers to become increasingly valuable over time.