Optimising Retail Returns Management

Managing higher rates of returns well is crucial 

The rate of returns continues to grow, making it challenging to balance customer expectations with commercial realities. Techniques that can help here include tightly defined return windows, charging a fee for returns, offering store credit only, and even “returnless refunds” for low-value items where the cost of return outweighs any benefit.

Research shows that customers often consider the cost to them of making a return before placing an online order. While charging for returns can help mitigate undesirable behaviours, targeting this to charge only certain customers is challenging.

When returns arrive back, the first point of contact is important

Quality control issues can arise if warehouse metrics drive the wrong behaviours, such as performance pay related to throughput. Having the right processes at the inbound touchpoint is vital to determine the correct path for returned items.

Making the end-to-end process efficient is essential

Slow processing of returns is detrimental to both the customer and the company. Efficient processing helps avoid backlogs and speeds up making stock available for resale. It is not a single happy path either. Can the item be resold immediately, does it need cleaning or repackaging, or does it need to be consigned to a discount route or even waste? Using warehouse automation in the right way can also help increase speed and efficiency.

Slower returns impact the ability to resell items and maximise commercial value, particularly for clothing/fashion item

Items returned out of peak selling periods can disproportionately impact profitability. Some customers return items to repurchase them at a lower price later, such as when a sale starts, or to benefit from cashback or card reward programs. Serial returners tend to over-order and return items more slowly, but understanding the profitability of this group is crucial before decisions are made that might put them off ordering in the first place.

Efficient communications and speedy refunds can help keep customers satisfied

If we assume most customers are returning items they originally wanted but now don’t, it’s an opportunity for retailers to deliver exceptional service and build customer trust in the brand. Streamlined and automated communications to update customers on return status will improve the experience. Customers anticipate timely refunds upon returning their items. Therefore, it is advisable to explore methods to expedite refunds once the items are confirmed as posted, provided the appropriate quality conditions are met.

Companies can use data to drive better decision-making

Returns data and insights should support decision-making. Capturing reason codes (e.g., description/size issue, not wanted, faulty) can be used to plan. Reviewing top volume SKUs returned can help develop action plans. Data can also be used to better understand customer behaviour, such as identifying trends in bracketing (ordering multiple sizes to try), wardrobing (wear once then return), and staging (buying items for specific events).

Reducing the carbon impact of returns is increasingly important

Customers and businesses are more aware of the carbon impact of returns. However, certain customer groups still prioritise lower costs over environmental impact. Gen Z consumers are most likely to buy multiple items and return those unwanted, but they are very aware of the environmental impact and want to know it is being managed. At the same time, many shoppers will not pursue environmentally friendly returns if it incurs extra cost.

Using data to profile customer segments and their returns behaviour helps balance increasing return volumes and margin erosion while strengthening profitable customer relationships.

A single approach to handling returns is unlikely to provide the best balance between speed of returns, re-sale availability, costs, and customer service.

Improving the end-to-end returns process can enhance customer satisfaction and operational efficiency, positively impacting supply chain and logistics strategy.

The impact of technology on managing returns is significant. Using technology correctly can greatly improve efficiency but beware of assuming all returns will follow a happy path.

• AI-Powered Customer Support: Self-service technologies, such as chatbots and virtual assistants, are increasingly being used to handle customer inquiries and returns. These tools can provide real-time solutions, manage large volumes of varying requests, and offer personalised recommendations based on customer data.
• Self-Service Technologies: Companies are shifting towards self-service options for returns, allowing allow customers to initiate returns, choose the method of return (e.g. local drop off or pick up), and provide online tracking. When integrated correctly, these technologies can reduce the burden on customer service teams and provide a smoother experience for customers.

Applied in the right way, these trends and technologies can help companies streamline their end-to-end returns process, improve customer satisfaction, and reduce overall costs associated with returns which in turn improves, thereby improving profitability.

Here are some key takeaways to consider when navigating this complex area:

• Implement a robust Returns Management System: Utilise the right software solutions to manage the complexity of returns. These systems need to track items from the point a customer requests a return (instore or online) until it is received and processed, including the customer refund.
• Streamline the Returns Process: Simplify the returns process for customers to reduce time and effort. This includes clear return policies, easy-to-follow instructions, and flexible return routes such as using local stores for drop-off.
• Enhanced Communication: Keep customers informed throughout the returns process to improve their experience. Automated notifications about the status of a return and the expected refund timescale will help.
• Collaborate with Logistics Partners: Work closely with logistics partners to ensure the returns process is efficient and cost-effective. This includes optimising the delivery of returns to the warehouse for quicker processing. You might also want to consider how warehouse automation can help improve efficiency by reducing processing time and costs.
• Optimise Inventory Management: Effective inventory management can help reduce the impact of returns on your supply chain. Ensuring the correct items are sent out in the first place will help, and it may be possible to resell returned items in anticipation of them arriving back at the warehouse.
• Analyse Returns Data: Regularly review returns data to identify patterns and common issues. This can inform improvements in product quality, descriptions, and customer service offerings.

As a closing question, how often do you review your returns policy and processes to ensure they are still fit for purpose? What may once have been a perfect fit might now need reshaping. Contact us for further information on how we can help.