Around 30% of all products ordered online are returned compared to about 9% in brick-and-mortar stores. Per this survey, 92% of consumers said they would buy again if the product return process is easy.
However, as an ecommerce store owner, this is one of the most perplexing problems perhaps - how to reduce the return rate? If you grapple with the same, don’t worry, you’re not alone. Even the savviest, most experienced retailers are rendered powerless when dealing with a high return rate.
What is Return Rate?
Return Rate is defined as the percentage of total orders that are returned by the customers. While you may think returns aren’t avoidable, that’s not entirely true. You can control the magnitude of returns for your ecommerce store.
How to calculate the return rate?
It’s quite simple. Here’s the formula to calculate RR:
RR = (Cost of Orders Returned / Total Sales) x 100
For example, a customer orders a five hats worth $100 and returns hats worth $20. Then the return rate would be,
RR = (20/100) x 100 = 20%
What is the impact of a high return rate?
1. Initial front-end costs of return
Returns involve an outlay of considerable costs such as loss of sale, cost of refund, to & fro shipping expenses, and cost of product disposition. The product that is returned gets inspected and is either resold or liquidated. When liquidated, they are sold for much less than their original sale price.
If the return rate is high, it also means that your store would employ additional employees and pay their salaries to handle the piling return requests.
2. Multiple inconspicuous costs
These costs are harder to quantify, unlike the front-end costs. These include wasted time and effort of delivery persons and back & forth communication with the customer.
3. Impact on brand image & customer churn rate
A poor shopping experience can discourage a buyer from becoming a repeat customer - especially important with the ever-increasing customer acquisition rate.
Moreover, today's online shopping experience is often supplemented by consumers sharing their purchases and opinions on social channels. A poor experience can dissuade many others from coming to your store.
How to control your return rate?
Retailers often are quick to blame customers for ordering multiple variants of the same product to try them on just to keep a few. Or, the average Joe who orders simply to try something only to return the product later.
And while such personas do exist, they are not the right ones to go by. Most returns happen because the customer received the wrong/damaged product or strayed too far from its description.
Now that you know the ball is in your court, we can talk about improving the return rate.
1. Adopt a liberal returns policy
A liberal policy should be such that it makes the customer feel confident in purchasing from you. When the return window is short, the customers feel a sense of urgency.
But if you lengthen the window, there is no sense of urgency, and customers get a chance actually to try out the product well. Many times, customers forget to initiate the return process as well.
As counter-intuitive as it may sound, but increasing the window from 2-10 days to 45-90 days can reduce your returns and bring in more loyal customers.
2. Provide high-quality product descriptions
Use high-resolution images to describe the product and work consistently with the customer to tweak the description per the feedback. This will help reduce the gap between product expectations and reality.
Wherever possible, give a 360-degree view of the product and show product colors in natural light or with a background that denotes where the product would be used (for example, show a toothbrush in a bathroom setting).
3. Be more thorough with inspections and feedback analysis
Continuously engage with your customers to note the feedback and work on the products that attract the most criticism. You can work on sizing, colors, fitting, etc.
Having high inspection standards in place before shipping out the product is critical. This helps ensure that damaged or low-quality items don’t make their way to the customers.