Returns issues force online retailers to perform a balancing act

The large number of returns in e-commerce costs a lot of time and money and is harmful to the environment. We can discourage the return of products by charging return costs, but are we driving our customers out of the online store? Pieter Van den Broecke, managing director of Belgium and the Netherlands, among others, explains how online retailers can find the right balance in their returns policy.

She/He really exists: a customer who orders 110 items of clothing and returns 107. Frans Falize, COO of Wehkamp, ​​mentions this example during a recent podcast about reverse logistics. Customers like these only cost money, he explains. All 107 items must be returned by the parcel carrier to the distribution center, where employees must unpack, scan, check and repack them one by one. That takes many times the time it took Wehkamp a few days earlier to collect and ship the same items in the largely automated distribution center.

Wehkamp's story shows that online retailers must be true balancing artists. First of all, they want to retain customers by offering them optimal convenience and comfort. This includes the option to try on products at home and to return them easily and cheaply. Research proves that returns processes can make or break customer loyalty. As many as 86 percent of shoppers switch to another retailer after two bad return experiences. The reverse also applies: retailers that handle returns quickly see 96 percent of shoppers return.

At the same time, online retailers are not interested in customers who abuse the right of return, as in the Wehkamp example. Figures show that on average 16.5 percent of all purchases are returned, with the note that return rates in fashion retail can be as high as 40 percent. The price is high: the average cost of a returned product is two-thirds of the cost of the item. Some retailers therefore unfairly consider themselves rich. They may be able to provide good turnover figures, but some of this comes from customers who are making a loss at the bottom line. What is the best return strategy?

Calculate return costs

The answer is twofold. On the one hand, it is important to support customers with a good, efficient and, above all, customer-friendly returns process. Advanced order management and omnichannel technology helps with this. Consider self-service modules that allow customers to register returns and print return labels themselves. Or modules with which the payment process can be started as soon as the parcel carrier has received the return shipment. Retailers that also have an offline channel can offer customers the option to return products to the store. Smart algorithms help to send returns via the optimal route through the distribution network. And of course, a suitable warehouse management system helps to handle returns in the right distribution center as efficiently as possible.

On the other hand, Wehkamp shows that it helps to charge return costs. Wehkamp has opted for 50 euro cents for each returned product: not nearly enough to cover the costs of the returns process, but enough to reduce the number of returns by 10 percent and prevent abuse of the right of return. As Frans Falize indicates in the podcast, Wehkamp no longer has loss-making customers. Although turnover has fallen, bottom line profits have grown. Moreover, the fear of many retailers that return costs have a deterrent effect appears to be unfounded. Wehkamp receives almost exclusively positive responses from customers, who fully understand the measure.

Fairer price

Wehkamp's step deserves to be followed by other online retailers. Firstly, because this drastically reduces the number of returns and also puts less burden on the environment. Secondly, because customers will eventually pay a fairer price for their purchases. Now that returns are still free, online retailers have no other option than to translate the return costs into a higher purchase price. Customers who do not use the right of return now invariably pay too much. That can no longer be explained.