Research shows that avoiding returns is a top priority for online retailers in Germany, Austria, and Switzerland. However, with the right returns management strategies in place, returns can actually reduce losses and increase customer loyalty, according to delivery management software company, nShift.
New research conducted by the German retail institute EHI on shipping and return management amongst online retailers in the DACH region, shows returns are the highest priority for the majority of them. This is due to the high return volumes they receive and the costs associated with processing them.
It also found that retailers in fashion and accessories typically see a quarter to half of orders being returned, with peaks reaching 75%. Return costs also vary significantly for this sector ranging from between 5 and 10 euros. In the home and interior category, return costs can be twice as high.
Attempts to tackle returns
Of the online retailers surveyed by EHI, 64% cover the costs of return shipments. However, major fashion players like H&M and Inditex (Zara) are increasingly asking the consumer to cover this cost in more countries.
To reduce returns volumes, 70% of the retailers surveyed, track and record the reason for returns. This is in order to take appropriate measures to mitigate potential returns from happening again in the future. The top reasons for consumers returning products included a lack of detailed product info on the retailer’s website and broken packaging.
For fashion retailers some returns are almost impossible to avoid, with consumers often ordering multiple items in different sizes to try before making a final purchase decision and returning the rest.
Utilizing returns for retention and upselling
Instead of focusing on avoiding returns, retailers can, according to nShift, the global leader in parcel delivery management software, benefit greatly from digitizing and using returns strategically to retain revenue, create customer loyalty and upsell opportunities.
One of the ways to retain revenue is by using the “refund effect”, which in its essence means cross-selling products during the return process, according to a study published by Harvard Business Review (HBR).
The “refund effect” can help retailers convert returns into exchanges
The refund effect describes the consumer psychology of repurchasing a new product in the event of a return. When a customer makes a purchase, they consider the money spent. That makes them more willing to consider exchanging a returned item for a different product rather than receiving a refund because they already perceive the money as gone.
Refunds on returned items can undermine retailers’ profits. The HBR study found that US consumers returned 16.5% of online purchases, costing retailers an estimated $816 billion in lost revenue in 2022 alone.
This is where nShift can help. It has been able to help multichannel and ecommerce retailers reduce returns related refunds by up to 30%.
Convert returns into exchanges
nShift has the following advice for retailers looking to create return policies and practices to capitalize on the refund effect:
- Make the returns process simple – a consumer-friendly returns interface makes it easier for the customer to exchange the item they are sending back for something else. With the right returns software, retailers can digitize the entire experience.
- Creating remarketing opportunities – emails about returns have significantly higher open rates than other retail communications. Retailers can create additional sales opportunities by weaving marketing messages into these emails.
- Drive footfall in-store – a digital returns process makes it easier to give customers the opportunity to take their items back into the store, making it easier to re-shelve returned items and increasing the likelihood of exchanges.
“Shoppers expect to be able to return products they buy online and are loyal to brands with a customer-friendly returns policy”, said Sean Sherwin-Smith, Product Director Post-Purchase at nShift. “It can be a real point of difference for retailers if they get it right and, as the study shows, it’s an ideal opportunity to cut revenue loss and strengthen the relationship with the customer at the same time.”
One company that has used the refund effect to great impact is Hunkemöller, Europe’s fastest-growing lingerie specialist. By using nShift’s returns management software solution, it has been able to offer its customers a seamless reverse e-commerce experience and has seen a spike in sales driven by a change in customer behavior, shifting online to warehouse returns towards in-store.
Hunkemöller converts returns to in store traffic by 15%
By using a returns management software, Hunkemöller has moved online-to-warehouse returns toward in-store increasing traffic by 15%. This has not only created the chance to strengthen customer relationships but also created new remarketing and repurchase opportunities.
Already operational in 19 countries with state-of-the-art webshops and over 900 stores acting as digital hubs, Hunkemöller has deployed the returns management software in six markets across Benelux, Germany and the Nordics. However, the project has been such a success that the company plans to roll it out to the rest of Europe and other global markets.
Returns software helps improve customer service and experience
“Returns are an integral part of e-commerce today but consistently high return rates are not healthy – they’re bad for the business, customer and the environment”, said Pieter Schalk, Sales Director at nShift. “What Hunkemöller has been able to do so effectively is focus on improving the returns experience, which not only helps control the return rate, but also provides customers a better experience based on convenience, choice and communications. The combination of which keeps them coming back for more.”
Prior to using the returns management software, Hunkemöller was using a traditional hardcopy return label in the box method for customers to return online purchases. However, this meant the company didn’t have clarity on how many returns came back every day or what was driving those returns. By digitizing the entire process, Hunkemöller is now growing customer loyalty through this frictionless solution.
“We’ve made returns part of a seamless omnichannel customer experience with increased returns control and insights” said Robin Visser, Omni Channel Business Development Manager, Hunkemöller. “What was a historical pain point for the company and our customers has been changed into something that adds real value. And because we’ve added more intelligence to the process, we’re getting much more in the way of consumer touchpoints helping us to constantly improve the service and experience we offer.”
Significant improvements in warehouse visibility and sustainability
The change in the returns process has also led to improvements in the warehouse. The Hunkemöller team now has clear visibility on the status of all orders as well as what is coming in and leaving days ahead. It also has a real-time dashboard where all returns are being shared so the Hunkemöller team can plan for the capacity they need.
It is also helping the company achieve its sustainability objectives too. By digitizing the process, the Hunkemöller returns process has gone from paper to paperless, almost overnight.
Great opportunities within returns waiting for retailers
To sum up, return shipments entail great potential for retailers, which they can unlock with the right measures in place. Instead of viewing returns as something to avoid, retailers will benefit from changing this perception into considering returns as revenue and customer loyalty generating, and changing their returns strategy accordingly.
nShift Returns is designed for retailers of all sizes. It creates a clean and simple consumer experience, reduces the administrative burden of manually processing returns to save time and money and creates new channels for retaining revenue.