Making E-Commerce Returns Work for Retailers

For many retailers, returns are an enormous operational, logistical and financial burden throughout the year — especially as carrier fees continue to increase. With the right technology and some careful planning, product returns can actually be re-imagined and turned into a revenue or efficiency opportunity. Here are four ways retailers can transform returns:

Charge for the 'Wrong' Returns

Offering free shipping on returns is a huge financial undertaking for any retailer. Don’t be afraid to pass on the cost of return shipping to some of your customers — many retailers do it, and it’s not as unexpected as you might think. To create a more seamless experience, you can charge customers for return shipping by deducting the cost from the refund on their returned items. From a customer experience perspective, it’s better to charge for shipping as a deduction vs. charging it as an additional fee, especially when you offer a free return at a store or a desk.

Encourage Buy Online, Return In-Store (BORIS)

Not only should every retailer offer BORIS for e-commerce orders, but they should be encouraging it as well. BORIS cuts out the cost of return shipping completely, both for the retailer and the customer. It also offers another benefit for the retailer — it brings customers into stores, creating a perfect opportunity to upsell or cross-sell them on additional purchases.

Work With a Third-Party Management Company

To minimize the operational and financial impact of returns, many retailers outsource at least a portion of their customer returns to a third-party vendor. With this method, consumers drop their returns off with the vendor at a designated location after presenting a receipt. From there, the vendor can return the items to the nearest store or ship them back to the retailer’s distribution center in the aggregate. Examples include the relationships between Kohl’s and Amazon.com, Michaels and UPS, and the vendor Happy Returns. Either the vendor or the retailer may be responsible for issuing a refund, depending on the specific agreement. This approach to returns is especially beneficial for areas in which the retailer doesn't have a physical presence, or for retailers that are strictly e-commerce.

Root Out Serial Returners

Serial returners — customers who return more items than they keep — are a major headache for any retailer with an e-commerce site. They often fall into one of two categories, based on their motives:

1. Malicious: These are customers who exploit returns to commit fraud. For example, one of my retail clients recently dealt with an organized retail crime (ORC) ring that was ordering huge amounts of premium wall outlets, and then returning similar-looking knockoffs for a cash refund.
2. Non-malicious: These are honest customers with innocent intentions. An example might be a customer who orders a pair of jeans in three different sizes to see which one fits best, then ships back the remaining two. That’s justifiable from their perspective, but creates unnecessary expenses for the retailer, especially when returning to the store or through a third-party vendor is a free option.

Many retailers are turning to prescriptive analytics to help them identify and address any and all serial return activity, while at the same time trying to convert them to an upsell opportunity in-store. Prescriptive analytics is an analytics methodology that analyzes data to determine:

• What is happening?
• Why did it happen?
• How much it would cost not to act?
• What to do to optimize the outcome?
• Who should take action?

In the aforementioned context, a retailer might set its prescriptive analytics solution to monitor its e-commerce data and look for customers with excessive returns. When it identifies a customer that fits the criteria, the solution uses other, more granular data to assess their likely intention. If the customer fits the criteria for “malicious” intent based on their pattern of behavior, the solution will issue a simple, plain-text directive to the asset protection team, ordering them to investigate. A customer determined to have non-malicious intent will also trigger an alert, but this one directing the customer service team to offer the customer unlimited returns in exchange for a monthly fee.

In conclusion, returns don’t have to be a pain point for retailers. Some strategic thinking and smart technology investments can turn this revenue-depleting opportunity into a revenue-generating opportunity.

As general manager of Zebra Analytics, Guy Yehiav is responsible for setting the organic and nonorganic growth, leadership strategy, and customer success for the Zebra Analytics business unit.