Interviews, insight & analysis on Ecommerce

The returns blackhole: Why poor returns communication risks future retail sales

Returns are a growing problem for retailers that continue to see them as an opportunity rather than a threat, says Julian Krenge, Co-founder and CTO at parcelLab.

UK retailers may be in denial about the scale of the problem of returns. The cost of returns to UK retailers had been raised as a problem nearly five years ago – with data suggesting it was a £60bn issue for the industry – but the full impact was never fully understood because all the costs across the entire supply chain were never fully analysed. And so, the debate cooled.

Yet even today, while the full costs remain uncalculated, we do know that almost all the profit on an order is lost just from the initial return, never mind the cost of processing it back through the supply chain and back on to the shelves or as reinstated ecommerce stock.  And this problem is now getting worse as their dependence on ecommerce had risen sharply during 2020, a rise that is unlikely to fall once things return to normal and stores re-open.

Original research of 150 of the UK’s leading retailers in our ‘Operations Experience 2021 – How Does UK Retail Measure Up?’ report highlights the scale of the problem, and demonstrates that the returns problem begins much earlier in the shopping journey than had been understood until now.

Most returns processes are built on a mentality that says the sales job has been done once the customer clears checkout. Our research proves this and shows that communication ends at dispatch – 87% of the retailers rely on the carrier to communicate during shipping. It is therefore at this point that communications between retailer and customer end, leaving the customer to manage the order themselves; of a total of 150 retailers surveyed, only 19 retailers actively communicated with the customer during delivery.

The lack of communication continues when it comes to tracking. Just 24% of the retailers directed their customers to a branded tracking page, and even those that do send a link to a branded page, these are rarely white-labelled and in the retailer’s ecosystem and are instead hosted by a third-party. What tracking information is supplied it is often inadequate; 20% of the retailers’ tracking pages displayed an error message while some simply redirected the customer to a tracking holding page. 20% of the retailers did not send a link at all or the link sent didn’t work.

At this point, most consumers get the message; they are on their own. And once they want to return goods, there is a knock-on effect, where the lack of care and communications often continues.

It is fair to say that a lot of good work has been done in the area of returns convenience. 54% of the retailers offered in-store returns and 48% offered Royal Mail returns either via a QR code or by including a label in the box. Other options include carrier parcel shop drop-offs, Inpost lockers and Asda toyou. These are all seen as convenient options.

Our report, which benchmarked retailers’ performance around key metrics including checkout, shipping and returns, showed that the average number of options for returning products offered by UK retailers was just two.

With other retailers, returns are simply a chore they are unwilling to face. 26% of the retailers expected the customer to arrange the return themselves and pay for it, compared to 68% who offered free returns. The remainder either had some free options, usually to return in-store, or the customer was expected to pay. Over a quarter (27%) only gave one option for sending back an item, limiting customers options and adding friction into the returns experience, especially in a time when people are not willing to venture far away from their homes to return goods.

The average amount paid was £3.97 despite a recent poll by Klarna which showed that 78% of shoppers would buy more from retailers if returns were free. But rather than judge retailers on whether they should charge or not, we want to focus on the continued broken communications loop that started during initial fulfilment. Communication during returns often barely exists – only 7% sent more than two messages during the process, although later on, 80% of the retailers did email to say a package had arrived back with the customer.

At the end of the returns process, 82% of the retailers refunded within three days, a broadly positive response given the number of consumers who cannot afford to order again until the money is back in their accounts.

The fact is returns are only going to become more of a problem for those retailers that treat them defensively as more retail shifts online, not just during the current crisis but permanently.

Returns need to be positively incorporated into the retailer’s offer and operational capabilities, particularly as they are a core element of loyalty and therefore a key competitive differentiator. A single bad experience can stop loyalty before it has even begun; Royal Mail’s data suggests 60% of online shoppers wouldn’t shop with a retailer again if they have a difficult returns experience.

Further proof that retailers need to act now comes from figures drawn during 2020. Research from McKinsey found that 75% of US shoppers had altered their brand preferences; globally, one in four consumers tried new brands during 2020 according to digital agency Braze.

Even if the product isn’t quite right for that particular order, delivering a seamless returns experience can go a long way to saving future sales – and the key to that is ensuring that the customer has enough choice to make the return convenient and enough information that they feel supported and kept in the loop at each stage.

Ultimately, Operations Experience remains the largest untapped revenue channel. Leaving key elements of communications and execution to third parties or individual departments that do not share a single view of orders, customers and stock is the road to lost sales and the chance to build loyalty. And poor returns management is just one more opportunity to kill loyalty before it has even begun.

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