6 to dos: how retailers reduce their returns rate

From collecting data to opening pop-up stores: these methods help e-commerce retailers better serve their customers. This means money.

6 to dos: how retailers reduce their returns rate
IFH Köln | Dr. Kai Hudetz

For online merchants, the post-holiday season requires managing returned items. According to a recent survey by the digital association Bitkom, almost every eighth Internet purchase is returned. Shoes take the lead: up to 80 percent of footwear is returned according to Greenpeace figures. The figure is 40 to 50 percent for textiles and 18 to 20 percent for electrical appliances. Kai Hudetz, Managing Director of the institute for retail research IFH in Cologne, recommends that companies first turn their attention to the data. “This usually shows exactly why customers weren’t satisfied and what information they were missing.” For DMEXCO, he explains which other issues should be on the agenda for retailers in 2019.


1. Collect data and get to know customers better

Hudetz advises companies to collect as much information as possible during the returns process. “The more data is requested, the easier it is to find out why the goods were returned.” Using the enclosed return slip, retailers can ask whether it was due to size, color or fabric, for example. These findings can be used in multiple ways. For example, retailers can suggest products to customers that are tailored to their size and taste. If certain goods are often returned for the same reasons, it is advisable to completely remove them from the product offering.


2. AR, 360 views and product descriptions

The data collected also indicates the information that is missing for customers to correctly assess the product. This can be achieved using technologies like Augmented Reality as well as 360-degree views that show products from all sides and make them tangible. Detailed product descriptions such as information on the size – “fits larger than usual” or “narrow at the top, wide at the bottom” – also help customers better assess the product, says Hudetz.


3. Collect as many reviews as possible

Psychologically, it’s a proven fact that, if customers have found a product to be good, others usually will too. “Customers are more likely to trust other customers than companies,” says Hudetz. Retailers should therefore ensure that authentic and preferentially positive customer reviews are made available. Just a few won’t do the trick. The more reviews a retailer has collected for a product, the better. Customer reviews create trust in the product or brand and thus help others make a decision. This also increases the probability that the customer will keep the product.


4. Speed and transparency in delivery

Once the goods have been ordered, it’s all or nothing. “Dealers are now required to deliver the goods to the customer as quickly as possible,” says Hudetz. The companies must ensure the best possible transparency in the ordering and delivery service. If the delivery of a product takes too long, the customer will look around for a similar item from competitors. The ordered article runs the risk of being returned if another retailer manages to satisfy the customer faster. “Customers are merciless in this regard,” says the researcher. In addition to this, customers now take it for granted that the shipping costs will be covered.


5. Bronze, silver and gold: creating reward systems

In an effort to keep the returns rate to a minimum, retailers have started using reward systems. Depending on the number of orders and personal returns behavior, customers can secure a bronze, silver or gold customer status, for example. This status can be used flexibly in combination with various advantages and incentives. For example, certain offers can be made exclusively to loyalty customers who also keep their ordered goods. Free shipping could be offered to this group of customers as well. “Rewards are popular among customers and help make sure they keep the goods,” says Hudetz. Important: negative consequences for returning goods have proven less helpful.


6. Pop-up stores provide proximity to customers and allow for a hands-on product experience

According to Hudetz, retailers with their own retail outlet have two major advantages. Firstly, online customers can choose to return an item offline, thus avoiding the need for tedious packaging. Secondly, the customer usually looks around for other items when returning goods to the store. In the best case, they will even leave the shop with a new product in their hands. This converts the return into a kind of exchange and helps cushion the blow on both sides of the deal. Etailers would therefore do well to set up their own shops. Either with a permanent presence or a pop-up store. Good examples of this can be found in every industry: from Westwing, who opened their first store at the bustling Odeonsplatz in Munich, to Womanizer, who recently offered their sex toys to try out in Hamburg. Several goals can be pursued at the same time, such as creating awareness for the brand and products or intensifying customer loyalty. But this can also be an excellent way to reduce the number of returns by giving customers the opportunity to gain hands-on experience with a product and try it out. The lack of touch-and-feel is ultimately a shortcoming that online retail will only be able to manage to a limited extent, even with augmented reality.


The bottom line:

The customer is king: a central insight that online merchants should take to heart even more if they want to reduce their returns rate. This includes responding even more to the needs of each individual. Collecting data is therefore not an option, but a must. Each order process provides a wealth of information that needs to be evaluated and used. Retailers must therefore first create conditions that make this possible. The data must be taken out of the silos and made visible in CRM tools for all employees if possible. It is even more elegant and efficient to invest in your own data warehouse in the medium term.