Using your returns process to drive growth, profitability, and sustainability in uncertain times
If an area of your business had a 20%-40% impact on your bottom line and a direct negative impact on the environment, would you have a team dedicated to managing and improving it?
That area exists—it’s called returns management. It’s a function that is often overlooked and written off as a cost of business. Without a clear process owner, it’s a high value area that can erode profit margins if neglected. When managed like other aspects of the business with a defined process, clear stakeholders, and measurable KPI’s, you will see an instant impact to your bottom line and it will set you apart from your competition.
The Big (& Growing) Problem of Returns
In 2021, U.S. ecommerce sales were $870 billion, up 14.2% over 2020 and 50.5% over 2019. The average online return rate for this same time period exceeded 20%. That’s 1 in 5 items returned. This has a significant impact on retailers and their margins and will continue to scale as their business grows.
Even retailers who charge for returns are not exempt from the financial impact the existence of returns creates. Research shows charging customers for returns doesn’t just impact customers after the sale—it negatively impacts conversion rates before the sale.
- 80% of consumers want free returns shipping
- 67% of shoppers check the returns page before making a purchase
- 92% of consumers will buy again if returns are easy
So while we can’t eliminate online returns completely (the in-store return rate is ~10%), we can implement processes to minimize the impact they have on growth, profitability, and sustainability.
Drive Profitable Growth with Your Returns Process
Consumers today increasingly make their purchasing decisions based on the strength of your returns policy.
A competitive returns policy starts with free returns, which nearly 50% of online retailers now offer. With good reason, too, as more than 67% of consumers will read your return policy before purchasing, and 80% of them expect free returns. The key to capturing these customers is a favorable return policy.
When you offer a generous return policy, this tells customers you are so confident they’ll love the product you have no reason not to offer a generous returns policy because they won’t need it. “Free Returns” is the modern-day version of “Money-Back Guarantee.”
Managing the Unsustainable Cost of Returns
The average return costs retailers 66% of the original price for the item when factoring in labor, transportation, warehousing costs, and losses on liquidation or disposal. For a $50 retail item, you can expect up to $33 in total cost to process that returned item.
To be able to offer a generous return policy and still be profitable, you should first implement an efficient returns process. This can be built on the foundation of the four R’s: Reduce, Reverse, Recover, and Recommerce.
Reduce the number of returns by reviewing your product display pages for accurate product descriptions and images. Lean into sizing technologies and customer testimonials to convey accurate product details to new customers. Compile existing returns data to identify SKU level return drivers to implement changes on. Use this data to set benchmark KPI’s to manage towards.
Reverse your items back to you in the most cost-efficient and streamlined manner possible. Utilize rate shopping technologies and consolidation points to lower transportation costs. Geo-sort returns to your closest warehouse location. You can further reduce pre-purchase friction and improve your overall customer experience by offering a branded self-serve returns portal where users can quickly and easily input or check the status of a return. Your customers benefit from an easy returns process, and your operations and support staff also benefit from the reduced administrative strain of manually processing returns requests.
Recover returned products back at your warehouse and process them to be moved through your available liquidation, resell, or recycling channels. This could include complete repackaging to sell as new, performing repairs or refurbishment, or a plan to minimize additional cost inputs knowing products will be liquidated, donated, or discarded.
Recommerce will maximize your recovery of inventory dollars from returned items. Offering a discount through resale channels is often the best method to turn inventory fast and in season and doesn’t require consuming more time and material resources in an attempt to resell the product as new.
Areas of focus when building out your returns process:
- Returns Recommerce™ – Sell your returns at the point of return initiation
- Warehousing – Space dedicated to returns processing & inspection
- Repackaging – Labor and materials to repackage your products to sell as new
- Repair/Refurbishment – Service to repair damaged and broken items
- Discount/Refurbished Channel – To sell items marketed as refurbished
- Wholesale Liquidation Channel – To sell open-box items at a deep discount
- Donating – For items with no other sales channel
- Recycling – For ethically disposing of remaining items
- Waste Disposal – Removing remaining unsalvageable items.
Minimizing the impact returns have on your business means you can offer better prices and a more favorable return policy than your competitors. But that’s not the only benefit.
Make Sustainable Returns Standard
Nearly a third of U.S. consumers say sustainability impacts their buying decisions.
The traditional online returns process has a dark side that is often overlooked. It’s negatively impacting the environment. Shipping items back to retailers generates 15 million metric tons of CO2 annually and introduces billions of additional touch points, each with its own carbon footprint.
Most consumers think these items go right back on the shelf to be resold, but that’s typically not the case. In fact, many returns are thrown away—in the U.S., 6 billion pounds of returned items end up in the landfill annually.
Implementing a sustainable returns solution, in contrast, enables you to offer a fully sustainable shopping experience from purchase through return.
By focusing on returns from prevention through recommerce, you are eliminating waste from the process and adding circularity to your business model. When you do this, you immediately recognize improvements in the name of sustainability. But there is more to be done in order to achieve truly sustainable returns.
One of the most exciting developments, poised to benefit both the bottom line and the environment, is returns recommerce.
What is Returns Recommerce™?
Returns recommerce is a direct response to the growing returns problem.
Returns recommerce introduces the concept of selling customer-initiated returns and shipping them directly to the next buyer.
By eliminating the need to send products back to retailers’ warehouses, you cut out the reverse logistics costs and issues of deadstock inventory (inventory that is unsellable). This also eliminates the CO2 emissions generated by returns shipping and keeps products in customers’ hands and out of landfills.
The resulting savings enable retailers to discount returns recommerce listings heavily. This incentivizes secondary customers, resulting in quicker sales. To top it off, instead of recovering $0.10 through liquidation, they can recover $0.50-$0.70 on the dollar even after a 30%-50% markdown.
With a traditional returns process, returns can be out of sellable inventory for 4-6 weeks (or more), and then they sit on the shelf and wait for the next sales opportunity. With returns recommerce, customers get the latest product offerings and retailers don’t receive out-of-season returns.
It’s a win-win for retailers and customers.
Hafback’s Returns Recommerce™ Solution
Leading the returns recommerce movement is Hafback, the world’s first marketplace focused on sustainability through returns paired with a returns management solution for ecommerce retailers.
Hafback takes consumer-initiated returns, instantly lists them for sale on its marketplace, and facilitates peer-to-peer shipping between the returner and marketplace buyer. This eliminates the need to send returns to your warehouse, cutting the cost and environmental impact this process creates.
If you’re ready to make returns your competitive advantage, Hafback’s Returns Recommerce™ solution can help you reduce your returns costs by 70% or more.