Posted by: Phil Streatfield Friday 26 June 2015 14.22

1. Returns is a major issue for retailers now - both in volume of returns and logistics/costs of fulfilling those returns

• Returns are now a fact of life in doing business in retail. Research from e-Commerce technology provider MetaPack found that 83% of consumers would stay loyal if a retailer could provide a reliable and effective returns service.  Depending upon the category involved returns rates can vary from less than 10% to over 35%.

• This developing returns culture has several implications for retailers. Returns cost money so many retailers bear the cost to ensure that they don’t risk alienating their customers. Free returns as part of an offer in fashion for example are used as a sales generator to help with conversion. By focusing on improving the returns process retailers can reduce the adverse impact on their bottom lines.

• Having a coherent returns process consistent with a cross channel shopping experience including own brand return points, remote third party serviced pick up points through to the use of the postal and courier services are all important as part of the overall offer. The economic goal has to be to minimise the cost of the returns process coupled with maximising the recovery value of the returning product. Equally getting the refund back to the customer quickly alongside offers to encourage them to buy again is important in building loyalty.

• To build confidence in an online facilitated purchase, the pure play retail businesses had to provide returns as part of the offer. Making this as easy as possible for their customers has raised expectations that this is something that all retailers should offer. Doing it for free as a marketing intervention has then led to the expectation that free returns should be where the market is at. After all if you want to return things to a physical shop you don’t pay do you? Over time this has bred an expectation that returns are a way of life. Consumer legislation and distance selling rules have also protected the consumer and allowed the situation we have, to evolve to where it is.

2. If returns do need to be made, how can it be made easier using the multiple platforms available - returns in store?

• Our LCP Omni Channel research last year highlighted that those retailers who were adopting an integrated Omni Channel model, including making returns easier for their customers, were more likely to have satisfied customers.

• In an Omni Channel world, the more successful retailers are highly likely to be offering free returns and a wide choice of options to facilitate the return of the product. Over the last five years we have seen a shift from either post only (pure play retailers), or store and post (bricks and mortar retailers) to approaches that involve post, stores, third party collection points (eg Collect+) and  Couriers. This has raised the complexity of managing the process and inevitably adds cost. It will be interesting to see how this area develops as retailers work to improve their customer returns experience.

• Good practices in this area include providing a selection or returns opportunities supported by using returns ready packaging, supported by the inclusion of ready printed returns labels without the requirement for pre-authorisation and with consumers getting credited on first scan into the carrier network, not on final receipt / processing of the goods back at the retailer.

• Those retailers who have designed the returns process into their overall order processing workflow are more likely to be managing this volume more effectively. With returns rates up above 35% in some instances your customers have just become one of your biggest suppliers. Reacting properly to product lifecycle implications is key. For products with a limited lifecycle it is vital to assess, repair (if required) and make the product available for sale again as quickly as possible to minimise loss / markdown.

• Those leading the way in this space are Amazon from a pure-play perspective and John Lewis with the inclusion of the Waitrose network plus using Collect + as well as their own network.”

3. With increasing nature of big shopping days like Black Friday - is the returns strategy going to be even more crucial - do retailers need to try and change customer behaviour? 

• If you want to succeed in non-food retail it looks more and more likely that you need a cross channel strategy. Within this world making returns easy and the process as seamless as possible across channels for the customer is critical. The returns experience has to be as good, if not better than the outbound purchase / fulfilment process.

• Some of the retailers we have worked with have considered whether they can change customer behaviour by charging for returns or encouraging an in-store return only – as ways of trying to help manage the economics of returns. Once these considerations are informed by customer research the chosen route is inevitably along the lines of providing as comprehensive a set of returns options as economically viable with the cost being picked up by the retailer. Both customer and also competitor pressures now really drive these decisions and this requirement.

4. Should retailers try and incentivise cheaper returns - in-store?

• Retailers will – and do – try all sorts of tactics to help mitigate cost and put downward pressure on returns rates and costs. The degree to which these kind of incentives work is down to individual customer economics and preferences. Ultimately if your competitors make it easier and free, then they will help set customer expectations which it will be difficult to fight against or differentiate yourself from if you want to charge or be less responsive to the returns request.

5. How do returns look internationally - is every country having the same problem and are there lessons to be had abroad? 

• Local culture, the market norms, and legislation tend to inform the actions taken in each country. Some practices and policies translate well across borders, for example some of the good practices we have highlighted above translate well from country to country. However, depending upon where you are trading you will find differing consumer laws and interpretations of laws in place, and as such retailers have to be cognisant of the environment they are trading in to adjust and adapt their approach accordingly.