Online sales have grown dramatically in recent years, bringing e-commerce to the forefront of business models. While companies tend to focus all efforts on marketing, payment methods, warehousing and last-mile deliveries, efficient returns also play an essential role within customer experience to thrive in a tight-margin, competition-driven market.
Amazon and other global online retail giants have set the bar high for e-commerce logistics, increasingly shortening delivery times, implementing different technologies to optimize operations and providing an overall seamless experience for customers, including smooth returns. Customers are becoming more demanding every day. According to a survey carried out by SendCloud, a good amount of shoppers check the returns policy before placing an order online, with 40 percent of them saying they will not order a product unless the returns period is at least 30 days. In addition, 74 percent of respondents stated they would not order at an online store if they had to pay for the return themselves.
“Returns were previously considered an optional part of the logistics process but brands are turning toward more customer-centric services,” said Benjamín Santa María, Co-Founder and CEO, Reversso, to MBN.
Growing sales also mean growing returns. In 2021, retail returns in the US grew to represent US$761 billion, according to the US National Retail Federation. In Mexico, during 2022, 2 out of every 10 e-commerce shoppers requested at least one return, according to AMVO.
Reverse logistics are considered a challenge across the industry, according to a global study from global technology provider Zebra. Sixty-eight percent of the e-commerce companies surveyed stated that purchase returns are a challenge for their operations, while only 20 percent said it is a big challenge.
While returns do not necessarily mean that the merchant is doing something wrong, businesses must keep a close eye to keep them at a minimum. In traditional commerce, customers get the chance to see and feel products, especially clothes. In e-commerce, shoppers do not always get the color or size of product they expected, which means returns are more common. The target should be for companies to keep returns within 2-3 percent of their total operation, according to Saúl Vargas, CEO, Pakke: “If the returns ratio starts to rise, you must make adjustments in your e-commerce strategy and the rules at the store, so the purchase decision made by your customer is much more accurate and you do not fall into constant returns,” Vargas told T21.
The return process that customers face will directly influence the experience they have and the probability that they buy again. A complicated return process reduces customers’ desire to buy by 80 percent, according to ComScore. “Allowing clients to return unwanted merchandise is important to build a trust-based relationship with them. When a brand makes this service available to potential consumers, it can foster a long-term relationship,” says Santa María.
A smooth return process starts with clear return policies, allowing customers to understand their rights. “If, as a shopper, I do not clearly understand the policies in case my product is wrong or I am not satisfied with it, then I will not buy there,” says Hendrick Aponte, Head of Platform Development, TiendaNube México.
Return policies are important and companies should keep it simple when writing them, says Santa María: “If a return policy is similar to a contract, it can intimidate customers. Policies have to be simple and communicate information clearly, while simultaneously showing customers they are trusted. If the policy includes protections for every possible unlikely scenario, customers will likely run away from the website.”
An efficient, smooth return process creates a feeling of confidence and support from the retailer to the customer, who will have the security to buy again, said Obed Galván, Operations Manager, Linio. Offering returns attracts new business, too, since the confidence of the client translates into a purchase, he added.
Managing sales and returns during peak seasons becomes even more challenging. While e-commerce companies can seize the opportunity to grow their customer bases during these seasons, they are also exposed to fail within their logistics processes. According to Reversso’s 2022 annual report on returns, exchanges and refunds, purchase returns increase by 83 percent in peak seasons such as Buen Fin, Hot Sale and Black Friday, returning to normal about four weeks later.
The study, which analyzed hundreds of thousands of requests for returns and refunds from over 300 e-commerce retailers in six Latin American countries, revealed that 81 percent of the requests were made due to satisfaction reasons. Regarding the refunding process, 92 percent of clients requested the money through the original payment method and only 8 percent through gift cards or store credit. Fashion is the top return category, given the product attributes such as size and color, which make successful purchases even more challenging. The former represented 28 percent of return requests due to inaccuracy when choosing size.
Ensuring the smooth operation of an e-commerce business also requires a smooth returns process. Companies need careful and controlled management of the entire reverse logistics process, which includes collection and transport, stock management, quality checks, restocking and dealing with lost or damaged goods, states Generix Group.
With margins as tight as they are in e-commerce and considering the growing competition, businesses must leverage technologies such as artificial intelligence and machine learning, in addition to partnerships with third-party logistics companies to manage the entire operation, automating processes, growing customer confidence and finally growing the business itself.