Transaction Heroes

Return Order Fulfillment

TransAction Heroes is Your Partner for managing

Shopify Returns


Product Returns: The silent killer of online sales

Product returns are potentially the silent killer of any online sales effort. Not only are you crediting a sale, but you are adding to your cost of goods through the cost of return shipping (often a non-discounted cost) and the additional cost of processing the product and administering the return upon arrival. Return rates are generally 2-2.5 X the rate experienced by ‘bricks and mortar’ stores but can vary wildly depending on your product segment, pricing, marketing, pre and post-sale communication and distribution strategy. Transaction Heroes has been active in returns management processing for 20 years and we have seen return rates below 2% and in excess of 20%. Bottomline: Measure your end to end cost of returns: administrative customer care costs, returns shipping costs, returns processing, return to stock vs scratch and dent discount re-sales vs. un-saleable, (i.e. your recovery rate).

What is the difference between return rates for brick-and-mortar stores and eCommerce stores?


There is no single “KPI” (Key Performance Indicator) to target when building out your marketing strategy for an online store. A bricks and mortar store generally is able to satisfy/reward the consumer immediately at the time of purchase. For the online purchaser, they generally pay and only receive a “promise” of a product at the time of payment. This sets up an inherent purchase anxiety at the beginning of the relationship. This anxiety be it significant or not, underpins everything that happens in the purchase process from the point where a sale is confirmed. Of course, there are ‘borrowers’ disguised as ‘purchaser’ who are happy to take delivery of your expensive dress for a ‘one time’ event and then return it at no cost (i.e. wardrobers). Or purchasers who are unsure of their size so order 2 or 3 sizes and use the returns policy as a fitting room and the ‘compulsive’ returner who could never be happy.

How should I process returns for online sales?


The first question to answer is ‘who’ will process the returns? Are you intending to process “in-house”? Are you intending to utilize your fulfillment partner? Or are you going to contract with a ” returns” specialist? While the keys to successful returns management would apply to any of these choices, there are key strategic and operational questions with each choice. Do not underestimate the challenge of processing returns, if planning an in-house strategy. The work is generally unpredictable and interruptive which can be very inefficient by nature. If you are intending to use a fulfillment partner, can they issue return labels and track the return to expedite exchanges and processing? What is the internal processing time from receipt to ‘return to stock’ or alternative disposition? Do they offer customizable solutions that reflect your product and market? Finally, is your outsourced provider working with you to find ways to reduce your return rates or are they intent on maintaining returns management as a profit stream for themselves?
 
It’s important to identify the tracking and processing requirements that balance a customer friendly interaction with a profitable returns policy. For example: When should an exchange ship? Upon a customer request? Upon confirming a return shipment? Upon receipt and confirmation of returned product? We advise our customer partners to experiment with their return policies. While it is a ‘truism’ that a FREE RETURNS AND SHIPPING” policy is an attractive feature for most online purchasers, it may not be the best policy for a sustainable profit model. Experiment with restocking fees, even very modest ones. Also restrict free shipping on returns, but provide a no hassle exchange policy, especially on apparel, footwear and rings, where sizing is a critical element in purchasing. If you are going to experiment, make sure your data collection process is solid. Measure and measure again. Do not rely on impression! Most capable outsourced providers will provide key returns operational data for you.


How do I reduce return rates?


First and foremost, commit to an ongoing formal program to reduce returns. Reducing returns is not an event and must be pursued by marketing and operational personnel relentlessly.

1. Have a clear return/exchange policy that is easily understood by all. Test some variants.

2. For every return record the reason for return. Keep it simple and obvious offer 3-5 choices...(do not include it as some endless customer satisfaction survey)

a. Product was not as expected
b. Product was wrong size
c. Could not get product to work
d. Product was wrong color, or I did not like the color
e. Product arrived too late

The above are just suggestions, each situation will be different. For example, one of our customers was selling a brand name tablet online and the product returns were high and as we were processing the returns, we were able to quickly identify that customers could not figure out how to turn the tablet on. We put a simple “How to turn the tablet on”, instructional sheet with each shipment and returns dropped dramatically. Similarly, if your apparel, footwear, or ring fit smaller or larger than normal, advise the customer at the time of purchase.


3. Have a post-sale customer communication plan. If the product is delayed, message the customer. If selling during “Black Friday”, advise the customer due to heavy sales volumes, the product arrive a few days later than normal. If you are using a carrier that does not provide tracking numbers, advise your customer when the product has shipped. Any assurance provided to the customer will reduce post transaction anxiety and is always better than a communication vacuum. 

4. Ensure all of your communication has a dedicated customer care email and preferably text address included, as well as a toll-free number. (Text is very popular in this area, as it is immediate and quickly establishes rapport.) It is also good to have an auto reply set up as you will receive ‘off hours’ inquiries and simply advising the customer you will get back to them within a defined number of hours will reduce anxiety…(note, not all of you customers will be located in your time zone).

5. Tag customers that return/exchange product so that they are identified when making orders in the future. While repeat customers are ‘gold’ in the eCommerce world, some online sellers have discovered a very small number of customers are responsible for the majority of returns…the 80-20 rule. If you see some trends limit exchanges to one per customer…. (advise them with the first exchange). This will limit the impact of “wardrobers” and “fitting roomers”.

6. Don’t sell products before you have it in stock and are ready to deliver. There is no quicker way to waste marketing investments and compromise customer relationships.


Give us a call at 1-888-900-HERO for a ‘no salesy’ conversation.

Important Notes for Returns Fulfillment


1. If you are selling and shipping from North America, make sure you understand the costs of offering returns from Asia, Africa or Europe. Often the shipping charges alone make it more economical to not have the product returned… (note the importance of tagging customers that return referred to above). In addition, the carrier networks are not as mature in many cases and do not easily handle return shipments.

2. If you are a Canadian based online seller or U.S. based online seller insure you have a returns policy and process that understands and mitigates the impact of cross border shipments. Typically, a fulfillment partner or returns management company will have established processed to minimize cross border transportation.

Transaction Heroes has been providing ecommerce fulfillment, returns fulfillment and customer care solutions for over 20 years in the B2C (Business to Consumer) sales business. We currently operate online order fulfillment and returns fulfillment for online sellers marketing large-scale televisions, home electronics products, gift cards, apparel, footwear, jewellery and literature. With fulfillment solutions to Canada, the United States and Worldwide.


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