E-commerce grew 20% for Costco in fiscal 2015—20 times faster than store sales.
E-retailers seek to minimize the pain of returns by maximizing gains in customer loyalty
At Shoebacca.com the golden word is "free." The shoe e-retailer offers free shipping on any size order, free shipping on returns and exchanges, and a 110% price match guarantee should Shoebacca or any other e-retailer put the same shoes on sale within 14 days of purchase. And while nearly half, 44%, of large e-retailers have a 30-day return policy, according to an E-tailing Group survey, Shoebacca's return window is open for a full year from the purchase date.
The e-retailer is trying to achieve two goals with these generous returns policies, says Nathan Barling, Shoebacca.com's chief technology and marketing officer. First, Shoebacca has to keep up with market leaders like Amazon.com Inc.'s Zappos.com, the shoe e-retailer that pioneered fast, free shipping and returns and also has a 365-day return window; Shoebacca sweetened its offer last year by adding the price guarantee. Second, Barling says, is to eliminate any hesitation that preempts a consumer from purchasing. "When you offer free and easy returns, there is no reason for a shopper to go to Dillard's down the street to get that product. They buy, and they are out nothing if it doesn't work out," he says. Barling says the site's conversion rate has gone up more than one percentage point since it started promoting its free policies and price guarantee in 2010.
And there's a bonus: Happy shoppers turn into repeat customers—Barling says a majority of customers who return items make another purchase—and advocates for Shoebacca, even if they didn't like a particular pair of shoes they purchased.
"When a customer is happy with the company and not the product, they will buy from you again because they are happy with your business and will tell people about it," Barling says. "They will never tell anyone about it if they had to pay $28 to return it."
How to handle returns is a question most online retailers have to face, as the average return rate for e-retail sites is 8%, according to Shop.org's State of Retailing Online 2010 report from Forrester Research Inc. And for apparel sites the return rate often exceeds 20%, says retail consultancy Kurt Salmon. While Shoebacca figures the cost of its returns policy and price guarantee into its product pricing, many web retailers facing stiff competition prefer to keep their prices low and charge for returns. At the same time, they try to keep customers happy by making returns easy and in some cases are beefing up the information on their site so fewer goods come back.
ScotteVest.com is an example of a web retailer that's focusing on helping consumers order items the first time that will fit them and meet their needs. And Scott Jordan, owner of the travel apparel e-retailer, says that's helping to keep his return rate at 6.8%, well below the norm for online apparel retail sites. What's more, ScotteVest.com customers come back at higher-than-average rates. While the average repeat customer rate is 27% across web retail categories, says Shop.org, 40% of ScotteVest.com customers on any given day are repeat buyers, Jordan says.
Jordan credits sizing tools created in-house, extensive product information and images, and the company's five full-time customer service representatives with helping keep returns to a minimum. 94% of the stock ScotteVest.com sells are products of its own design, and Jordan says the company tries to keep sizing and fit consistent across its product lineup. That means a buyer who previously ordered a size large jacket can buy a shirt in the same size and be confident it will fit. Exceptions are clearly marked.
ScotteVest.com also bases its sizing guide on data submitted by its customers, who are asked to describe their body type—some send photos—and their weight and height stats and the size of ScotteVest apparel they find works best for them.
A video embedded with the size chart tool encourages consumers to call or live chat with customer service before ordering for the first time, and representatives have on hand a sample of each product in every size sold. Agents even conduct calls using webcams and Skype, a free online video calling service, when necessary so they can visually walk customers through the measurement process. If correct sizing remains in doubt, as a last resort reps will suggest the customer order two sizes and return the one that doesn't work.
"We empower customer service and tell them to treat customers as though they were on the other end of the line, and to take as much time as the customer needs," Jordan says. "We don't measure performance on how quickly they get them off the phone. We recognize it is costly to provide the customers this level of service, but it is more expensive to deal with a return or exchange." Jordan says he doesn't directly track the operational costs associated with returns and exchanges.
When a return or exchange is necessary, customers must e-mail or call customer service within 30 days of purchase to get a returned merchandise authorization number. They use an address label that comes on the packing slip and pay to ship the package using any method they choose. ScotteVest staff process returns daily at the retailer's distribution center and if the item passes inspection, meaning it is unworn and has its tags, ScotteVest processes the consumer's refund within about 24 hours. Each year during the holidays, ScotteVest extends the return window to 60 days, although Jordan says the e-retailer is flexible beyond that on a case-by-case basis if the returned item is unworn and can be resold.
Make returns easy