The Surprise Gift of Returns: Driving Customer Retention During the Holidays

The holiday season, synonymous with joyous celebrations and bustling retail activity, also brings a notable surge in product returns. But while many retailers perceive returns as a challenge, our data reveals a surprising and valuable insight — returns are an untapped opportunity for amplified customer retention. Providing customers with a straightforward and hassle-free return policy may be all you need to keep them shopping with your brand well beyond the new year.

Understanding the Numbers

Based on proprietary composite data compiled from customer product returns across hundreds of Optimove's consumer brand clients, we observed a notable surge in returns during peak seasons. Compared to nonpeak months, the average number of customers returning products doubles. At the same time, our data reveals that customers who return items boast a significant 26 percent retention rate — twice the 13 percent rate of those who don’t make returns. Furthermore, the total order amount of customers who return items is 27 percent higher, on average, than those who do not make returns. And the future value of customers who engage in at least one return is 94 percent higher on average.

Our data also indicates that existing customers exhibit higher retention rates and greater loyalty over time. For instance, six months after Black Friday, 33 percent of existing customers made at least one more purchase, while only 16 percent of new customers did the same. Even one month post-Black Friday, retention rates for existing customers were approximately twice as high (15 percent) compared to new customers (8 percent). Similar patterns were observed on Cyber Monday.

Optimizing the Return Experience

Retailers can take advantage of these unexpected trends by treating holiday returns as valuable opportunities to engage with existing customers and foster loyalty through positive experiences. It's also a valuable touchpoint to gather critical customer data that enables marketers to start their next interaction more informed. Starting with customer data is critical to delivering highly personalized, timely messages. Therefore, streamlining the returns process and ensuring ease with conveniences such as free return shipping, automatic refunds, and pre-paid return labels not only encourages repeat business but also contributes to a strengthened bottom line.

Retailers embracing flexible return policies, such as extended return windows, multiple return options, or "keep it" options for items exceeding return shipping cost, also stand to gain customer trust and repeated sales. What you don’t want is a restrictive, complicated or disorganized returns process — 84 percent of shoppers say that a poor return experience will prevent them from coming back to a brand.

And while some retailers are resorting to fees to offset return costs, this may inadvertently undermine customer retention opportunities. Rather than uniformly charging fees, a strategic approach could involve implementing fees only on refunds, while offering free returns on exchanges or for store credit. But if you can offer free returns, do it, as it can substantially enhance customer lifetime value: 78 percent of shoppers buy more over time when a retailer offers free returns.

Rethinking Returns for Retail Success

Customers usually return items because of product dissatisfaction, not because they dislike a retailer. For retailers, returns are an opportunity for meaningful customer engagement. Brands can deepen loyalty through positive experiences and transform the holiday return surge into a strategic advantage for sustained customer satisfaction.

Pini Yakuel co-founded CRM marketing platform Optimove in 2009 and has led the company, as its CEO, since its inception.