Pictured (Left) Moritz Weisbrodt and Gabriel Thomalla, Founders of Alaiko.
Tackling returns in ecommerce
By Moritz Weisbrodt Founder and CEO of Alaiko
In recent years, as shoppers have moved away from the high streets and towards online stores, ‘reverse logistics’ or returns have become a deciding factor in how, where, and why customers shop. In equal measure, as returns grow in importance for consumers, so they also grow as a financial and logistical headache for most SME retailers. In this piece we will explore the returns market in the UK and what smart ecommerce companies can do to make sure they are in the best position to manage them.
‘Buy more, think less’ and the ‘free’ returns explosion
Industry giants in the ecommerce space like ASOS, Boohoo and Amazon started the trend by offering free returns, which was an effective tool in encouraging people to buy more and think less about it. This was particularly important in the pandemic where all shopping headed online and trying things for size was just not possible in store. For large companies, with economies of scale and large margins, offering free returns is a small price to pay for customer loyalty and bigger orders, but for smaller companies, it’s become near unaffordable.
In 2022 alone returns cost UK retailers £60 billion. From a fashion perspective, things are particularly tough. According to ecommerce marketing and Business Intelligence company Nosto, around 19% of consumers will buy several sizes of the same garment because sizing across the industry is not standardised well and they want to be in the privacy of their own home to try things on. It’s estimated that a return costs the retailer an average of £20 per item and results in an up to a 30% loss in profits, which is unmaintainable for smaller businesses. Unfortunately, with 71% of UK consumers saying they will avoid online shops if they have paid returns, retailers can’t afford to not offer free returns. It doesn’t take a mathematician to work out that returns are becoming costly on many levels to these retailers.
Of course, there is also the environmental cost of returns to consider too. Encouraging a free returns culture in ecommerce is not good for the carbon footprint of retail. Last year the British Fashion Council estimated that the returns process more broadly generated 750,000 tonnes of CO₂ emissions.
And it’s not just returns behaviour that has changed. Industry giants have raised customer expectations across the board in terms of real-time tracking, last minute address changes and rapid shipping. Free return or not, consumers now expect to be able to see where their return is at any stage, and receive their refund quickly which requires retailers to have sophisticated track, validation and banking arrangements in place.
Tackling returns and setting the right expectations
UK buyers have a legal right to return their item if they notify the vendor within 14 days, and there is no doubt that the free or super efficient return culture is here to stay. So here are some steps that small and medium businesses can consider as they evolve their offer in this area and make changes to ensure they are as competitive as possible.
1.Concentrate on the business and outsource shipping and returns
The best way to prevent returns is to ship the right product. It sounds obvious, but nearly a quarter of all returns are simply because people have received the wrong item or order. Often, it pays to get the professionals in. Fulfilment service providers can maximise efficiency and minimise the margin of error that leads to returns. Such providers have access to the latest in fulfilment tech like pick-to-light which is almost 100% accurate when it comes to picking and packing items.
Using fulfilment service providers also enables businesses to meet the wider standards set by industry giants. Providers have the tech to offer their retail brands transparency, from real time tracking to stock level alerts, which means that their buyers enjoy a seamless buying experience. Using a DTC focussed provider can level the playing field and meet consumer needs properly which can be game changing, particularly for retailers competing with the bigger brands.
2.Look carefully at how the product is represented on your website
Around 22% of returns are due to the product looking or being different in real life compared to its online representation. We recommend having photos that are as true to life as possible, this may include taking photos in the studio and in natural light. It is clothing that is being sold, having advice on whether the item runs true to size is also worth considering. Product related return information (e.g. product not true to size) can easily be collected from customers with little effort by a digital returns portal. You can then in turn use this data to provide it as further information for other customers within your shop.
3.Encourage your customers to leave reviews, if possible including photos
Reviews don’t just increase the chance of someone buying your product, they also decrease the chance of a return. Ultimately, to prevent returns you want your customers to make the best, informed decisions possible – even if that means not buying the product. Customer reviews are really good for this, prospective customers can see the product in real life, and have a better idea of what they’re buying.
4.Spend a bit to save a lot, investing in good packaging saves on returns and enhances customer satisfaction
Broken and damaged orders are a near-guaranteed return, unfortunately sometimes this is unavoidable, and out of your control as a business. But, having a baseline of good, secure packaging can save big on returns. Bike vendor, VanMoof noticed a high number of bikes arriving to customers damaged, so they put an image of a flatscreen TV on their boxes, which are a similar size to TV boxes. Almost immediately damages dropped between 70-80%, and so did return costs.
Returns are important to customers, and unavoidable for your business. But that doesn’t mean they should eat into your profit margin. Therefore, well managed returns can become another important lever for long-term customer loyalty. Online stores create transparency and appreciation when they deliver a seamless return experience for customers. When retailers inquire about return reasons, customers feel that their feedback is important, and become aware that processes are constantly being improved. This serves to enhance customer loyalty and the likelihood of repeat purchases which of course helps brands, as acquiring new customers is much more expensive than retaining loyal ones.
