Shopper Experience

Tradeoff to exchange: Rethinking returns for sustainable growth

Loop Returns President Aaron Schwartz talks about the post-purchase connection point with customers.

an illustration showing shirts and shoes

Returns are part of the customer experience. (Illustration courtesy of Loop Returns)

Ecommerce transformed the return.

Online shopping by necessity meant that returning a good required mailing it, rather than sending it back to a store. But the change was about more than logistics.

As they sought to center the customer and provide a reason to choose online over in-store, online retailers introduced friendly return policies that often allowed shoppers to send back items for free, and spelled out clear instructions. In part, this was designed to ease concerns about potential drawbacks of shopping online: If an item that looked great on the web didn't meet expectations in person, a person could feel like they were essentially stuck with it. With free returns, however, the decision wasn’t as fraught, and the process of sending it back had less potential hassle. It broke down a barrier to making a purchase, and in turn moved more people to the buy box.

To be sure, however, there was a tradeoff. Someone had to bear the cost of the returns, and often that was the brand or retailer that sold the items. Yet the flexibility of making post-purchase try-on and evaluation of a product part of the process of buying an item had a bigger impact: It helped to improve the shopper experience of ecommerce.

As these policies became more common, customers adjusted their expectations. Returns were on the checklist of elements considered even before a customer decided to buy an item. In a 2018 UPS study, more than two-thirds of shoppers said they check an ecommerce website’s return policy before making a purchase.

Now, there's a clear understanding among brands and retailers, said Aaron Schwartz, president of Loop Returns, a returns platform that works with Shopify brands like Allbirds, Chubbies, Brooklinen and others.

If customers don’t see a clear and generous policy up front, they will choose to shop somewhere else that does. On the other hand, if returns are cumbersome after a purchase, a customer won’t shop with a brand again.

In turn, this meant that returns became an area where brands and retailers could win the satisfaction of consumers, and even convince them to buy again.

A process that once happened mostly out of view was suddenly front and center within the customer journey.

“The best brands understand that returns are not a cost center,” Schwartz said. “Returns can be a connection point with customers.”

Aaron Schwartz headshot

Aaron Schwartz. (Courtesy photo)

Schwartz saw the value of these connecting points firsthand. While running a DTC watch brand, he wrote notes by hand to every customer, and included them with shipments. Through thousands of notes, the gesture reflected how building a bond with customers and creating community was important to him. But in the process, it was also a chance to get feedback about the products, and improve them based on what customers said.

Over time, Schwartz saw how the returns process was similarly an area where feedback could be gathered. Using Loop’s solution, customers tell brands why they are sending an item back. That provides context about sizing, fit and other element. This information can in turn be put to work to assist with merchandising.

Customers can also choose what they want to do with the product. Rather than send back a return, they might want to exchange it for another purchase from the same brand, or credit. Or, they may want to drop off an item in-person. More recently, as concerns about environmental sustainability and the call to extend the life of goods grows, there have been more requests to donate an item, or rout it to a resale platform.

That ability to provide options is increasingly meaningful amid the economic swings of the last three years.

Returns rose right alongside ecommerce during the pandemic. In 2021, the return rate jumped to 16.6% from 10.6% in 2020, according to the National Retail Federation and Appriss Retail.

As a result, brands and retailers were seeing more returns than ever. With ready access to capital and a priority on growth, they continued to process them, just as they sought out new customers and kept orders moving out the door.

Over the last 18 months, however, life got more difficult. A period of supply chain headaches gave way to fuel costs going up, which in turn raised the cost of shipping and other logistics costs. Capital is no longer flowing as easily. Now, many retailers are facing a glut of inventory as the supply chain bottlenecks finally ease up. Add to all of this that customer acquisition costs are going up, consumers are getting more price conscious as inflation rises.

The recent tightening has put a focus on building loyalty among consumers, and being operationally efficient, Schwartz said. Every customer that is added becomes more important to retain. In turn, the revenue earned from every purchase those customers make is important for brands to keep, rather than having it sent back along with an item that now must again move through a supply chain.

It has brought a new willingness to explore different return options. Seeking to control costs, brands and retailers have also rolled out changes to return policies. The fast fashion retailer Zara is testing a policy to charge for returns at dropoff points. On the other end of the continuum, retailers told CNN they where considering giving people their money back and asking them to keep returns so as to avoid more congestion in their logistics networks.

Whether retailers ultimately choose these options or others, the point is that brands and retailers are rethinking long-held policies. With that, the information they have and the tools to collect and analyze it becomes increasingly important as they seek to understand what customers want, and how they can best serve them. Having options to provide to consumers can help them retain revenue, while still providing a great experience.

With shifts in focus, metrics also change. As Schwartz put it, there’s now been a realization that sustainable growth matters.

“Brands are not just looking at the short-term,” he said. “They’re looking at the lifetime value of the customer.”

That focus is necessary now, and it will continue to be important if a period of rapid growth returns. Continue to factor post-purchase interactions in as a part of the shopper experience, and the chances of that lifetime extending will grow.

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H&M could start charging customers for making returns | CNN Business

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