Embracing returns process can generate savings, profits, says Newgistics
Historically, returns have been swept under the carpet in online retail – no one wants to own up to them, much less own the process of returns disposition. But by viewing the returns process strategically, retailers can differentiate themselves competitively, reducing operational costs and even generating incremental profit, according to returns service provider Newgistics Inc. For example, vice president of marketing Jonathan Dampier says retail clients using Newgistics` SmartLabel service have increased customer retention by 1% to 3% as demonstrated by A/B tests on site.
SmartLabel, which is a preaddressed, bar-coded label delivered along with the online customer’s order, allows shoppers who want to return an item to affix the label to the front of the original package, seal the package and drop it in the mail. The cost of return shipping is deducted from the credit issued back to the customer by the merchant. “Customers become more confident when making a purchase that returns will be smooth sailing. That has played out as increasing repurchase,” says Dampier.
Dampier adds that among several retailer clients – 40 brands now use the service – implementing SmartLabel has resulted in cost savings at the call center. Across those clients, calls with questions about the returns process have been reduced by about 35%. In addition to such operational savings, Damper says the program generates revenue for most retailer clients. Newgistics charges a set fee for every package it handles for a retailer client, and retailers typically mark that up when passing return shipping fees on to the customer.
“On average for retailers (across product categories), 20% to 30% of what they send out is going to come back as a return,” says Dampier. “With that number that high, we feel it’s best that retailers be proactive about embracing returns instead of just leaving them as a backroom function.”
Dampier says Newgistics` clients’ experience disproves the notion held by some retailers that making returns easy for customers will only increase returns volume. Among four retailer clients who have tested that premise in A/B tests, returns by customers given the option to use SmartLabel were either the same as or less than those from the control group not offered that option.
“Sometimes, the idea is that if a retailer makes returns easier, it will have more customers returning items,” says Dampier. “That doesn’t make sense. The alternative is having a customer who doesn`t return the item, but is unhappy. Why would you want that?”
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