RETURNS: Transform your Pain Into An Opportunity

Returns: Transform your pain into an opportunity

Returns are no fun to any business, but never a process to be ignored. No matter how informative and descriptive you are for your products for some or the other reason, business, especially eCommerce, has to face customers who return the products. Most of the time returns are considered a headache for online as well as offline businesses.

The reason behind such fear of return is the cost that any business has to face by providing return services. To facilitate return services business has to face costs in terms of transportation of products under return, staff, and resources. There is also a risk that products returned may be in condition to resale again. Moreover, for businesses possessing thin profit margins the cost of returns becomes a major challenge, and for whom every sale becomes a small victory.

Above all, thanks to huge online selling platforms like Amazon, Flipkart, Snapdeal, and many more that provide free of cost return services, it becomes a great competition for online as well as offline stores to facilitate customers with such services else even visit some regular customers is also lost in addition to a loss in profit due to unsatisfied or no return services.

So major discussion focuses on whether Return products/goods services are being boon or a curse to business.?

All these parameters in the first instance seem to have an effect on the profit margins of the business. When parameters of return services and their effects are considered likewise, any business at first glance feels that return product services are only a headache creating a loss in profit margin. Moreover, it varies for different sectors.

But if you expand your view and vision thinking beyond this math calculation for a direct method of profit margin only, you will also conclude that return services which at present seem to be a headache and pain are actually aiding great opportunities in a broader vision.

Discussing in detail these points we will come to the conclusion that while return policy services at first instant being a burden actually increases sales which in direct form seems to decrease profit margin but in an indirect way is actually increasing the profit margin.

So now the question that arises in mind's how does the return policy actually aids in increasing sales and thus profit margin and what are the reasons for return service in Business: a pain actually getting converted to profits.

Much of the research is done on this topic Return: A pain transforming to opportunity.

So let us discuss now on this topic constantly hitting in mind that

How Return services help to increase sales?

Racine, who worked at Amazon and a UK-based firm says “Returns are an opportunity more than a problem.”

Studies have proven that generous return policy aids to increment in sales with an increase in Return product facility. Almost 30% of the total online purchases are returned, which is not at all an ignorable point.

In a study published in the Journal of retailing, Narayanan Janakiraman and his team concluded that a smooth, well-planned, generous, lenient return policy leads to a more pronounced increase in purchase stemming. This clearly indicates that return policy services provided to customers actually benefit business - at least in encouraging them to purchase from your store only whether online or Offline.

In a study published in the Journal of retailing, JunYong Kim and Brain Wansink also concluded that consumers prefer products under a lenient return policy more favorable than products under a restricted return policy.

This clearly justifies that your “100% money-back guarantee, free return delivery” and other such return services actually encourage your customers to buy more maybe later on also encouraging them to buy products of different categories, different brands also from your store
whether offline or online. Maybe customers are satisfied with your services to help in indirect marketing due to mouth publicity done by customers to others.

Let us understand in detail, for example, if you do not provide return services and reject return requests of customers, at first you might feel you prevent yourself from losing in profit but may happen that now a customer-facing loss of money being unable to return and/or failing to possess
desired products, next time while purchasing may switch to a different store. This overall process of denying return services at the end not only leads you to loss of future sales but also loss of regular customers.

At some instant, it is also found that there are such customers too who purchase after knowing return services and policy.

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Return services is one of many strategy to generate more sales

A lot of discussions and even survey is done on whether the inclusion of return service in business is actually aiding to increase profit margin or degrading it. Almost all surveys and research conclude that Return service should definitely be one of the parameters while strategizing and
deciding parameters to generate more sales and thus increase profit.

A survey by Narvar, a post-purchase solution company on “Making Returns a competitive Advantage” also found opportunities by involving return policies in business rather than return being a burden. 

In his survey, he found that

49% → actively check the seller’s return policy before buying
40% → bought multiple items expecting they will be able to return some Which confirms that most customers are comfortable with the return services from their favorite stores. Moreover, Narvan also surveyed that,

82% → of People who returned products were repeated customers in the future.
95% → Out of all returners this many people said that being satisfied with the return process They’ll purchase from this seller again

This says that high-value customers too are also most likely to utilize the return process. So as a final result, any business owner should make sure that this high-value customer experience makes them feel better about your brand.
This survey clearly states that “Customers remain loyal if they feel a positive experience while returning”.

Narvar also concluded that more than half of customers replaced the returned item. The mind trick, of course, is to get them to replace the item rather than just refund, thus sales of other products. His report says that of total returns, 57% were those who replaced a returned item, and almost 40% purchased the replacement from the original sellers.

Racine in his survey said that along with building customer loyalty and value, returns help in providing rich merchandising and indirect free-off-cost marketing opportunities.

Khalil Saleh, CEO and co-founder of Invesp, also the co-author of Amazon.com’s best selling book: “Conversion Optimization: The Art and Science of Converting Visitors into Customers” also in his research and survey concluded that 67% of customers check the return page before purchasing products from your store.

It is also important to note that 92% of customers will purchase again if they are satisfied with return services.
A University of California, Berkeley study also concluded that customers will purchase again. 

Its survey stated that,

92% of customers make a future purchase when offered easy return services.
66% of customers reviewed the return policies before purchasing.
82% of customers refused to purchase when returns were made a hassle.
This study clearly states that those who experienced good return services spend more than other customers.
The moral of the story, never a point to be ignored is more than 90% of total returners become loyal customers and purchase again if they are satisfied with return services, and also it is a lenient one.

The return service is a part of the customer's experience

Not only should businesses implement a return policy but should also see to it is a lenient one, stating customers should not face hassle experience while returning. Most of the time return policies are company-centric. Knowing the importance of return service, it is activated but
again taking into consideration direct profit margin, companies may push restocking fees and return transportation charges on customers. Such policies would make customers less likely to return products, wouldn’t they?

At first, glance that’s true as it seems that such policies did both provide services that make customers happy and also reduced the return ratio. However, as customers are unhappy with the strict return policy it makes them less likely to purchase from you again.

Is losing that customer's lifetime purchase worth refunding that one sale? Obviously No.

A study published in the Journal of Marketing Research concluded that customers are more likely to purchase the products when they feel products have a lower level of risk. Not only this but customers spend more in your store if your return policies are lenient, lowering the consequences for “bad” decisions.

The author conducted an experiment over more than 26,000 customers for six months from online retailers and they found and came to the conclusion that their firm was able to increase short and long term profit when they accounted for the risk related to product returns on themselves in addition to managing product return costs. They were also able to target more profitable customers by including such type of risk rather than simply implementing the traditional customer lifetime value-based model generically.Thus the moral of this discussion states that if return policies are customer-centric rather than company-centric again it acts as a boon to business by aiding to increase sales.

As said earlier, discussions and surveys, and experiments let us conclude that returns at first glance seeming to be a headache is actually turning into an opportunity.

But these may not be direct, as in this competitive environment proper strategy and plan, and analysis should be done on converting headaches into opportunities.

I know after all this long discussion now you are in deliberate to know as of How actually to transform return’s cost - A pain to a value, an opportunity of selling more?

Convert return’s cost to profit

Listen to your customers complain properly. Only then you would be able to decide the necessary action for returns.

Offer free exchange for wrong size products.

Be deliberate by advertising your policies using online as well as offline platforms.

Have a proper time Limit for your returns.

Give customers an option for returns like Repair, Replace, Refund, Buyback also for offline stores if customers are supposed to return to the store give them the flexibility of returning to a nearby store, or warehouse if possible.

Plan proper marketing strategies with a skillful team to gain customer loyalty for your store.

Likewise, Offer waller credit instead if customers are regular purchasers from your stores rather than just refunding. This helps to build strong relationships with customers as they will come back to your store for sure to use wallet credits.

Along with wallet credits instead of refunds, you can also offer promotional credits, credit card reimbursement for store credits for future purchases, and many such marketing strategies can be planned and implemented which in the end leads to profit though products are returned.

Strategize products to be attractive and sticky so that customers feel like they are losing something if they are returning products unnecessarily.

Racine in his discussion said that by being thoughtful about returns you are actually focusing on your profit as you are getting an opportunity to analyze the reason for return and thus now know where to invest. This is possible because now you can plan and strategize on products variable
as per return analysis and implement marketing strategy accordingly which at the end helps to increase sales.

Converting return’s cost to profit is not limited to this only. The huge discussion now goes on planning strategies for converting returns to opportunity and increasing profit.

We have now concluded that returns are not actually paining but an opportunity and also the reason behind this. Also, a lenient return policy should be implemented.

Know How RMA/Website RMA (Return Merchandise Authorization)  vastly simplifies the entire returns process by facilitating customers with an interface to communicate for return requests through Website RMA and for users to manage all backend operations of return most conveniently.