Product returns are inevitable for an e-commerce business. Trying to avoid expensive returns with an awkward returns policy will result in greater losses. Thus, a straightforward and transparent returns policy is beneficial to an e-commerce business.
High Returns Rate in E-commerce
Research shows that at least 30% of all e-commerce orders end up being returned, as against just 8.89% of sales in physical shops. Factors contributing to this higher figure include:
- Inaccurate/unclear product information
- Incorrect products sent
- Products damaged or not fit for purpose
- Unwanted gifts
- Fraudulent returns
Data from UPS suggest that the cost of processing returns can range from 20% to 65% of the total cost of goods sold. But an easier returns policy can reduce this figure.
Value in Better Returns
A study published in the Journal of Marketing showed that stores that offer free returns see customers spend up to 457% more than they did prior to the return. The converse was also true, with repeat purchase spending dropping by 75-100% for customers who were asked to pay for return shipping. A straightforward and free returns policy clearly pays for itself in improved future sales.
Best Practices for Better Returns
Here are some best practices to both reduce the need for returns and any negative impact when they are necessary.
- Create descriptive product data
- Allow and encourage customers to leave product reviews
- Invest in an order fulfilment platform
- Allow and encourage returns to warehouse or physical stores
- Create a centralised online returns portal
- Offer competitive return deadlines
- Communicate return policies clearly
- Offer product exchanges when possible
- Manage the issue of fraudulent returns delicately
Customers satisfied by a clear and convenient returns policy are more likely to return – and with their business.
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