Reducing ecommerce returns – Vicky Brock, CEO at Clear Returns, www.clearreturns.com presentation from IMRG Connect retail briefing May 14
Returns are killing retail profits, but who cares?
Tackling returns is complex and here is no single magic bullet. Often there is no one person or team responsible for minimising returns. And even when there is a named owner of “the returns problem” that person requires the buy in from teams across the full spectrum of the retail operation in order to be effective. Yet that co-operation rarely happens.
From the recent returns roundtables and discussions Clear Returns has hosted at Home Delivery World, IMRG and the Retail Forum, we’ve seen the same internal barriers occurring in retailer after retailer:
- Incentivising revenue targets over profits
- Failing to understand the margin impact of returns, including reselling returned stock at a loss
- Assuming a return to be a positive outcome for a customer
- All KPIs and performance metrics stop at the sale
- Accepting that high levels of returns are inevitable
- Lack of focus on shortening the period to get returned stock back on sale, including fulfilment of clean stock ahead of returned stock
- Lack of enforcement of existing returns acceptance policies
- Poor data visibility and lack of actionability from existing returns data
There is no fix to this without a top down approach. Nor can a single individual or team “solve” returns alone.
So why not turn the thinking upside down?
Is there a board of directors of any retailer anywhere that doesn’t want to boost profits, reduce costs and increase customer experience? Is there any management team anywhere dedicated reducing the profitability of stores and customers?
So what’s the problem?
Returns have become bogged down in the vocabulary and remit of operations and logistics. They’ve become someone else’s problem. It’s so easy to blame the delivery company, or those pesky customers buying two sizes of everything. It’s harder to acknowledge that ecommerce has changed how customers buy and that everything from buying strategies to marketing and stock coverage are being impacted.
So how about talking about keeps instead?
How can retailers co-ordinate buying, sales and marketing, fulfilment and service processes to ensure more customers keep what they buy and more sales actually result in a profit?
With a vision like that from leadership, those internal barriers seem a lot more surmountable.
Posted by Vicky Brock
It is easy to dismiss returns as someone else problem – someone in operations or the warehouse maybe.
But helping your customers keep more of what they buy is every retailers business.
Returns kill profits – and not just due to operating costs, but also because the impact of a return on customer experience and lifetime value can hit future revenue. If a problem product hits a new or high value customer, the impact is felt right across the business.
As the infographic above highlights, the costs associated with handling a problem product are only half the story.
The costs of acquiring a customer in the first place are rarely factored in to returns – yet some campaigns (like the one featuring this jacket) can directly cause returns.
But the real pain for retailers is the impact even a seamless return can have on customer experience. Up to 80% of first time buyers never shop with a retailer again if they have to send back their first order. That impact can be 2 – 10 times the operational costs of returns in the first year alone.
It is not really a sale until the customer decides to keep their purchase, so helping your customers keep more of what they buy – for example by spotting and acting on problem products and inaccurate descriptions – can only be a win win!
Posted by Vicky Brock
With razor thin margins, a return leaves an eBay seller out of pocket. The same is true of larger retailers, or course, but for the individual seller it’s personal. They care because it’s their money.
Not only is it the cost of lost product and postage that hits the seller, the eBay ratings system means that a seller’s future trustworthiness and margins may be impacted by a return. Customer experience is quantified. Good sellers achieve better prices than unknown or poor scoring ones, so maintaining ratings are really important.
Returns send a chill through their hearts in a very direct way – and experienced eBay sellers have devised tactics to avoid them. Some of these tactics are also highly applicable to larger sellers and correlate to how Clear Returns helps tackle returns in larger, complex organisations.
Pain in the wallet drives prevention
The thing that hits an eBay seller’s wallet hardest is the non delivery claim. A seller has to balance low postage costs to stay competitive, with the more expensive certainty of a signature. Plenty of items are sent without any proof to protect the seller and whatever has gone wrong, the buyer always get the benefit of the doubt. The seller has lost their product, shipping costs, has incurred eBay and Pay Pal costs and is thoroughly out of pocket. But a seller can’t afford to risk their reputation, ratings and right to sell on eBay by obstructing the return, even when a seller suspects a buyer is exploiting that with false claims.
One way eBay handles this – something Clear Returns has also tackled in a different, more appropriate way for multichannel retailers – is to allow sellers to block potential purchases from future transactions. This in theory helps prevent bad buyer behaviour escalating – at least with the same seller. The seller community also effectively polices buyers, and buyers are rated in the same way as sellers. A buyer with repeat suspect behaviour may find themselves blocked, meaning genuine buyers and sellers both benefit.
Not all customers return equally
When a good customer misses out on a buying product because it is out with a known fraudulent shopper (who is less price sensitive than the customer who was planning to keep it) but retailer and shopper lose. The way Clear Returnshas brought this important customer level actionability to large retailers is through our predictive data platform, which scores and segments customers based on what they keep, then allows automated service responses during and post transaction. The return can be prevented before it occurs.
Good shoppers having a bad experience can be better serviced, fraudulent returners and particularly wardrobers can be effectively blocked. The seller is protected, good shoppers stop subsidising the cost of fraud – and get an improved overall experience.
Closing the expectation gap
The eBay seller has to reduce the risk of surprises for the buyer in order to minimise the likelihood of a return. While this is more complex for enterprise retailers, at its heart the challenges are the same
Apart from delivery issues, an eBay seller is most vulnerable to those returns caused by expectation gaps and quality control issues. They are are not obliged to offer refunds because something doesn’t fit – only if they fail specifically to deliver on a promise. Providing good measurements and fit information will cut down on questions and get a better sale price, because it reassures the buyer – but ultimately the buyer chooses what they are prepared to pay for something that may or may not fit.
What the seller has to do is reduce the risk of surprises for the buyer – with good descriptions, correct labelling information, images from multiple angles – and most important of all, highlighting and photographing any flaws or faults. After delivery issues, undisclosed flaws and mis-description are the key causes of returns. And as many retailers will recognise, the nearer the top of the price range the item sells at, the less toleration the customer has for product issues.
Awareness of the scale of the problem drives action
Because the eBay seller feels the pain directly in their pocket, and because for the most part they have a very simple supply chain and touch most parts within that process, their hands on tactics for reducing returns have become pretty sharp. The data is very real to them, even if once the return occurs, they have little choice but to understand why and ensure the same thing doesn’t happen again.
The enterprise process is far more operationally complex – yet at its heart the issues are the same. First the scale of the problem needs to be understood – from data comes insight, then action. It is by closing the expectation gap, spotting problem products, tackling the major cost points and differentiating problem customers from the majority of good shoppers that ultimately determines profit.
Posted by Vicky Brock
Many UK retailers said that Black Friday was a big success with Amazon UK selling 64 items per second on the day and consequently ‘winning’ Black Friday. But is the celebration of what seems like a huge surge in profits for retailers premature?
‘Despite all the fighting in the isles on Black Friday and Cyber Monday, it’s way too early to determine the winner of this match’, said Vicky Brock, CEO of retail returns company Clear Returns. ‘Until the returns data comes in over the coming weeks–and return rates could be as high as 50 per cent–it’s too early to tell who’s “won” these big sales days’.
Visa estimated that £360, 000 would be spent per minute in online stores on Friday, but after Clear Returns’ analysis, it could be that the fuss of big discount days placed right before Christmas might not be worth it for retailers.
The problem is in the way the discounts on these days are set up that make products especially likely to be brought back.
‘All the preconditions necessary to drive up returns are in place’, said Brock. ‘You have a time sensitive offer placed alongside a sense of scarcity and panic, which appeals to over-buyers who make their selection at home post-purchase and panic buyers who get caught up in the emotion of the frenzy and will likely later return the products they did not mean to buy in the first place’.
No respite will be offered by Cyber Monday as shoppers take to their favorite online stores and scroll through for discounts on their favorite electronics, avoiding the city center crowds. Online stores typically have a far higher returns rate and a higher cost of servicing returns than physical stores.
It has been estimated that around £650m was spent online on Cyber Monday. But one-third of online sales on any ordinary shopping day are returned, so imagine the difficulty online stores could face when you take the formula of big business sales days and combine it with online buys.
Retail Week recently estimated that 600, 000 unwanted presents bought on Black Friday and Cyber Monday will be returned by shoppers after Christmas. Post-Christmas returns are a huge loss for retailers, but at least it is an expected one What is not expected are the exceptional levels of hype-driven returns that will be flowing in during the days prior to this peak trading period.
Clear Returns says that we need to not only focus on post-Christmas returns because the timing of post-Black Friday and Cyber Monday returns us also seriously problematic for retailers who are busy fulfilling production during the days leading up to Christmas.
‘I do think we’re going to see peaks in returns just before Christmas and profits will tumble as a result, especially since returns are rarely treated as a priority. Returns are the things that often get tackled only after the warehouse has dealt with outbound fulfillment, meaning that those pre-Christmas returns are just going to sit there. There will be nowhere for the returned stock to go except into January sales or clearance channels’.
Once the costs of returns have been subtracted from the products sold on Black Friday and Cyber Monday, there may be some retailers who are putting away the celebratory champagne and really reassessing the effectiveness of it all.
Posted by Lisa Monozlai