If there were anything good to say about the COVID-19 pandemic, it would have to be the positive impact it had on ecommerce. In 2022, ecommerce sales in the US are expected to cross the magical $1 trillion mark for the first time in history — a truly unprecedented result. Before the global lockdown, analysts did not forecast reaching this figure until 2024. Globally, ecommerce sales are expected to reach $5 trillion in 2022 and $6 trillion by 2024.
In the wake of this boom comes an urgent need for online stores to evaluate their return policies and find ways to manage returns more efficiently — a boost in online shopping inevitably yields a respective surge in returned goods.
This is where a returns management system (RMS) comes in handy. In this post, we’ll take a closer look at what RMS’s do and the functionalities they offer.
Making a sale is the easy part, but the customer journey does not end when the order is paid. This is especially important for online retailers, who have to deal with returns, exchanges, complaints and refunds. These processes take time, but are just as important as your sales and marketing efforts.
The after-sales part of commerce is crucial for the shopping and brand experience, helping you build a following of loyal customers and ambassadors. Stores that don’t pay proper attention to automating and streamlining their returns processes are putting themselves at risk of losing customers.
While returns are nothing new in offline stores, ecommerce especially favors them — online shoppers purchase goods without seeing them in person or trying them on. Wrong size, wrong color, or simply an unwanted gift, you name it — the reasons are plenty, driving high return rates. Depending on the source, at least 30% of all products bought online are returned compared to just 8.89% for brick-and-mortar stores.
Also, to make their apparel stand out, online fashion stores often fall into the trap of excessive photo editing, leading to discrepancies between the photo and the actual product. This makes it hard for shoppers to properly evaluate a product before purchase.
Return rates are also different across product categories and online payment methods.
There is an uncanny link between returns and consumer psychology. Researchers at the University of Texas-Dallas examined the effect of return policies on shopper behavior and made a surprising discovery: more lenient returns policies and longer return periods translate into more sales. They also examined the different variables shaping a store’s return policy and their business impact:
Shoppers based in the EU have the right to return their online purchases within 14 days, and are entitled to a full refund. Some stores, however, extend this period to 30 or even 90 days.
The longer the time limit for return, the lower the return rate. This seems to go against logic, but scientists attribute the effect to a psychological phenomenon known as the “endowment effect.” In other words, customers become attached to the items they bought over time. They also tend to be more forgiving of items’ shortcomings and potential defects once they start using them. In psychology and behavioral economics, the endowment effect means consumers prefer to retain an object they own rather than acquire that same object when they do not own it.
When we look at returns from a psychological point of view, a long time frame for returns reduces the urgency around the decision to return the product. Since there is no pressure to take it back to the store, they sit with it and live with it.
These researchers have also discovered a link between more lenient returns policies and sales. Easy returns, with no questions asked, were found to increase purchases, although to a lesser extent than long return periods.
Certain stores make the returns a bit challenging for their buyers. Shoppers may be required to provide a receipt or other proof of purchase. For some products, the shopper may also be required to provide photos to help the store determine if the product is still in its original condition, or they may even have to send the product back in its original packaging.
Shoppers may decide to return a product based on whether or not the purchase can be fully reimbursed. For example, if the store does not offer free shipping for returns, the shoppers are less likely to send the item back. However, they might then be less likely to purchase it in the first place.
Cheaper products are returned less frequently than more expensive ones. Also, different segments of the market have different reasons for buying and different concerns about risk and quality, depending on whether it is a durable good or a consumable good.
Source: National Retail Federation
The statistics draw a clear picture of returns in ecommerce: apparel and fashion goods are most likely to be returned.
It’s not that online shoppers are fickle. Rather, returns are just a natural consequence of running an ecommerce business. There is a growing need for proper software to support the returns processes and help online stores manage it properly. Still, few B2B or B2C organizations have optimized their processes, resulting in less efficiency and greater cost.
Certain products or sales merchandise may not be eligible for a return, as the whole purpose of the sale is to make room for a new collection.
Some stores, instead of a full refund on the purchase, may only offer store credit toward future purchases in the store.
Retailers are on the lookout for software solutions and measures to help them minimize the rate and cost of returns. However, evidence shows it is usually a balancing act of boosting overall sales and cutting the number of returns.
Sizing of apparel is inconsistent across brands, for example, and sometimes between individual products of the same brand. We’re increasingly seeing stores which, to slash their return rates, offer detailed size guides, virtual dressing rooms and various fit prediction plugins. They sometimes send their customers “did it fit” surveys in an attempt to make it easier for future customers to find the right size. This is the second best thing to trying clothes on in a store.
There is no silver bullet when it comes to minimizing returns. To get the balance right, every store must properly evaluate their return policies, which is a nuanced process. This may not necessarily improve sales, but it can help to cut the number of returns.
Returns management systems are usually cloud-based SaaS solutions that coordinate and streamline the various aspects of returns and after-sales processes such as warranties, repairs and recalls. They can be configured to a customer’s own requirements and integrated with ecommerce platforms and supply chain solutions.
RMS’s should:
An RMS manages returns processing, repairs, return-to-vendor, customer portals, returns merchandise authorization (RMA) initiation and customer notifications.
Using the right returns management software can lead to savings in time and money, and happy customers. According to McKinsey, organizations report up to a 5% increase in profits and a 15-25% increase in customer satisfaction after streamlining and optimizing their returns.
Below are a few reasons to consider a returns management system.
Without standardized, digital workflows helping efficiently receive and process returns, the store is likely losing money.
Organizations need full control over verification of returns to eliminate errors and reduce cost. RMS’s help track the actual item count. Because it’s verified in the system, manufacturers only need to credit dealers for actually received inventory.
If you don’t have visibility into why a return occurs, or you don’t realize return trends, then you have an opportunity to save money or identify potential problems. An RMS can string all the elements together to give you a better picture of the situation.
B2C and, increasingly, B2B customers expect convenient platforms for returns, and full visibility into the status of their returns. RMS’s are offered as branded online portals that allow businesses to initiate, track and manage the entire process, from product registration, through support tickets and RMA, to label printing.
Popular RMS’s offer features like:
This goes to show that returns management is a complex and important leg of reverse logistics.
Good returns management has become a key distinguishing factor boosting customer loyalty and satisfaction. However, many online businesses lack the ability to efficiently manage returns, still using manual processes instead, which are time-consuming and inefficient. It’s a lost opportunity and a space for improvement.
Let’s now look at the inner workings of RMS software, with some examples based on Reclaimit.
Reclaimit is the market leader in automated returns and complaints systems in the Nordics. Their RMS is an all-in-one platform for managing returns, complaints and claims. It offers automation which helps businesses avoid costly customer management issues and reduces hassle connected with consignment notes.
Reclaimit takes care of returns from customers, suppliers and retailers. Returns from different countries can be sent to the same return center, where the shipment is consolidated for cost-saving before being sent back to the store.
Because Reclaimit extends API’s, it can integrate with a headless composable ecommerce platform like Centra, as well as business systems, CRM’s, and logistics and transport systems. Such a setup offers full support for omnichannel ecommerce, faster time to market and a more efficient and less expensive build of the site.
Once Reclaimit integrates with the ecommerce platform, customers can register their returns through the iframe embedded on the site, then select one or more items they want to send back. The store receives all the information in real time.
The store can freely customize the iFrame to exact specifications for a seamless, on-brand experience.
Reclaimit uses API’s to integrate with a company’s ecommerce, ERP and storage systems in order to collect customers’ purchase data, offering visibility into returned or exchanged products. The customer registers their complaint online and receives updates on the process.
Whether you only sell online or also through brick-and-mortar stores, refunds are processed in the same way. When the return or guarantee period for a customer’s purchase has expired, the system will stop the process. Terms and conditions for returns can be freely updated in the admin panel at any time.
When a customer registers a return, a consignment note is created according to pre-chosen shipping options. Automated status updates are sent to the customer via SMS or email. Once the item has been delivered to the delivery service or post office, the panel shows that it’s on its way, enabling the store to approve or reject the request — or contact the customer if necessary.
Finally, when the item arrives at the warehouse, the case is closed, all systems are automatically updated, and the consumer gets a refund — if eligible.
To slash returns rates, it’s important to have proper visibility into what is being returned and why. This allows a business to optimize returns processes, spot inefficiencies and stay ahead of problems.
To foster trust and engagement, RMS’s should send automated notifications about the status of returns. This will encourage consumers to make future purchases based on a positive returns experience. As a result, customer service won’t have to answer calls from customers wondering about the status of their returns.
Minimizing losses requires getting returned items to the right place as soon as possible. This is where automation helps. RMS software prevents items from lingering in your warehouses or store backrooms. With automated disposition management, you can more efficiently decide what to do with returned products. This may include:
Naturally, industries with the highest returns rates will benefit the most from an RMS. However, efficient returns management can reduce costs for nearly any type of business.
RMS’s provide branded returns experiences that facilitate fast and easy returns, as well as automated notifications to keep customers updated. As a result, retail and ecommerce employees are able to inspect and grade items more quickly, resolve customer issues efficiently, and dispose of returns earlier in the cycle when possible.
With an RMS in place, you can process returns, return-to-vendor items, repair and refurbish items, and complete put-away tasks. The platform should provide workflows that streamline the returns process, standardize tasks and improve accuracy, as well as drive customer loyalty with an easy returns process.
Business and customer workflows can be configured across warehouses and shipping locations. An RMS can be integrated with other supply chain solutions, providing a fast ROI at a fraction of the cost of setting up a warehouse management system.
Product returns are not something you can overlook for long. Returns management should be seen as a top priority by online stores, as it reduces costly customer management and all the hassle connected with preparing consignment notes. The result? Smoother returns, a better user experience and higher consumer loyalty. Properly addressed returns can help your business function efficiently and rake in greater profits, and earn you the love of your customers.
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