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Every holiday season, millions of global consumers participate in Black Friday and Cyber Monday sales, and last year, I was one of them.
Having just moved, I was in the market for a bed. After browsing through an impressive selection at a nearby store in Los Angeles, I landed on a chocolate brown bed frame with a textured headboard in dusty pink.
Although I was buying from a brick-and-mortar store, the company had cut its teeth in ecommerce as a direct-to-consumer brand. As such, I eagerly anticipated a swift delivery of my new bed.
Two weeks later, however, as I was checking on my shipping date, I noticed two headboards had been ordered. The mistake was simple, but the return process was not. After several frustrating phone calls and an advised rejection of the order at the door, I finally received my correct order — months after my initial purchase.
Returns are one of the greatest nuisances for consumers and businesses alike, and the dreaded process only intensifies as we head into the holidays. Last year, an estimated $171 billion worth of merchandise was returned over the holidays. While returns propose a huge challenge, they also present an opportunity for businesses to win brand loyalty and gain repeat customers.
Here’s how to make sure your returns strategy doesn’t kill your customer experience this holiday season.
Related: 4 Ways to Improve Your Ecommerce Customer-Return Policy
Prevention is the best strategy
When it comes to returns, the best strategy is to avoid them altogether. Returns cost ecommerce retailers more than $600 billion every year — that’s without taking into consideration the loss of business due to customer frustration.
In my case, had the bedding company built verification technology into their cart to flag the unusual bundling of two headboards and one bedframe, the mishap could’ve been avoided altogether. Likewise, if the company allowed customers to edit their orders after purchase, I could’ve corrected the mistake as soon as I noticed it after checkout.
When it comes to avoiding returns, it helps to understand who your customers are and why they’re returning products. For example, if you notice your customers are frequently buying the same pants in two sizes and returning one, it’s likely because they don’t know what size they are going to be. That’s where you can leverage generative AI to review data in ratings and reviews to proactively let customers know how the pants generally fit.
If a product has a high return rate, get on top of it quickly and either pull it, change the product description to be in line with what your reviewers are saying, or reduce the price and change to a no-return policy. That way, you are better positioned to sell the right products in the right manner to your audience.
Related: 5 Easy Strategies to Prevent Costly Retail Returns
Personalize your policies
I’ll never forget the first time I ordered a pair of shoes from Allbirds. When they arrived, the fit was too small. My first thought was: This is going to be annoying. But unlike my returns experience with the bedding company, I was able to click straight through to re-order the correct size, and the new shoes arrived before I could even send back the old pair. In fact, I was able to use the new box to return my old pair complete with the shipping label they sent me.
The brand trusted that I wasn’t a fraudulent customer and made it easy for me to make the return. Not surprisingly, I now own about six pairs of Allbirds. Now that I understand their fit, I’ve never had to go through the returns process again.
Through the data the brand collected on me, they now know I’m a good customer and can continue to reward me with a free, no-fuss return policy. Had I continued to return shoes, however, and abused their generous policy, they may have opted to adjust it. That’s the beauty of technology — businesses can now identify what value an individual customer brings to their business and structure their returns policies accordingly.
For example, if you identify a customer has a high spend and low return ratio, you may want to offer them a flexible, no-charge return policy as a reward. On the other hand, if a customer has a high return ratio, you may want to charge them for the shipping and shorten the time window on their returns. Considering that 44% of ecommerce retailers report return-policy abuse, it only makes sense for businesses to personalize policies.
Luckily, as generative AI and emerging tech become more accessible, it’s easier for brands to aggregate consumers’ purchasing habits and cater to their high-value customers. Generative AI can also help assess product condition and determine how to get an item back into the supply chain more quickly or optimize its resale price. Not only that, but AI can help analyze your customer base and determine who the refurbished products would be best marketed towards.
Of course, it takes time and planning to personalize return policies. If you’re not there yet, the holidays are a great time to collect data on new and existing customers to inform future policy rollouts.
Impact beyond dollars
Returns aren’t just a burden to businesses and consumers — they also have a massive impact on our environment, and the footprint is growing every year. According to Optoro, an all-in-one returns platform, returned inventory creates 9.6 billion pounds of landfill waste each year and emits more than 27 million metric tons of carbon dioxide — the equivalent of a year’s worth of driving for 5.9 million cars.
While there are tools and strategies to greatly reduce the carbon footprint of returns, not all businesses have the education or resources to access them. That’s where the government could step in to play a key role by creating tax subsidies that help businesses implement effective strategies to reduce their return footprint.
By creating return subsidies for businesses, the government could help reduce the billions of dollars worth of returned merchandise and strengthen our circular economy by creating processes where products and materials are reused, refurbished and remanufactured. Large companies like IKEA have recently doubled down on efforts to become a circular business, but not all businesses have the same resources to attempt this.
It’s unlikely we’ll ever live in a world where there are zero returns, but we can try to reduce them as much as possible, and when they do happen, make the experience as comfortable as possible for our customers while also being aware of the impact returns have on our environment.
