Two months into 2023, consumer returns are at an all-time high. UPS is reportedly processing 70 million returns in the wake of the holiday season, which is 5 million more than this time last year. It’s a testament to the fact that shoppers are seeking convenient and personalized returns, with 76% saying that free returns are an important consideration when shopping online.
For better or worse, this record surge is a reminder that ecommerce providers are grappling with the "Amazon Effect,” facing ever-increasing pressure to match Amazon's speed and convenience when it comes to delivery and returns. Learning from Amazon’s success, brands have adopted flexible return policies and leaned into minimal-click purchase paths, significantly lowering the barriers to buy. The promise of low-friction online shopping was accelerated during the pandemic, as more people migrated online and engaged in home delivery. Brands and carriers responded by investing in delivery capabilities with faster speeds and increased delivery capacity, raising the outbound standard. Few brands have made similar investments in returns, and even fewer have a customer-centric reputation for returns like Nordstrom.
However, now that consumer spending is down, transforming returns from a cost center into a customer experience “wow” moment is critical. Brands need to focus on retaining existing customers, increasing brand loyalty and repurchase rate. The smartest brands realize that a flexible returns policy not only amplifies brand loyalty, but builds confidence in making the initial purchase.
Although all categories saw a rise in returns, fashion has been disproportionately affected. Not only do products need to function well, but they also need to meet the subjective fit and style expectations of a diverse range of customers. Some brands have a return rate of up to 40% in the apparel space, especially for items such as shoes and eyeglasses.
Not being able to see an item in person is part of the reason for these rates, but there’s another factor: apparel hasn’t been online for that long. It was the last major product category to migrate online about a decade ago, appearing years after items like books, home goods and electronics had already made the switch. Online fashion is still very much in its growth phase, which is why variables like size, color, and fit have an outsized impact in the industry. Brands and consumers alike are still in the process of understanding expectations for the shopping experience. This has also led to people "bracketing" their purchases, meaning they order multiple sizes or colors to try on at home, then return what they don't want.
Why the post-purchase experience matters
Ecommerce works fairly smoothly as an outbound motion: a customer buys an item, a company like Veho or FedEx picks up the product from a warehouse and delivers the item to the customer in days. Decades of investment went into making this process fast and efficient. The process required to get something from a customer's doorstep back into the warehouse, on the other hand, is not as clearly defined and has received far less attention over the years. This presents a problem for brands because, if a customer has a bad returns experience, they are much less likely to re-engage with the brand. Few customers want to deal with the “arts and crafts” hassle of box, printer, label, tape and drop off. As such, consumers now rank box-free returns as the number one preferred method for online returns.
Time and time again, we see that businesses that offer easy returns experiences engender both stronger customer loyalty and higher conversion rates, proving that post-purchase doesn’t have to be a cost center and can actually function as a revenue and CLTV driver.
Making returns into the easiest possible motion for the customer pays off in the long run. As customers increasingly buy more than one color or size or use an online stylist to sample items and return what they don't want, a great returns experience has become a make-or-break moment. Brands know that it's not about getting customers to make just one purchase; it's about building a relationship with a customer.nvesting in the post-purchase experience is a great way to build long-term trust, which leads to a lifetime of purchases.
That’s why, at a time when a lot of companies are cracking down on returns, companies like Veho have been advocating for making returns easier with an industry-leading, box-free and label-free, doorstep pickup return. This is a “wow” moment for customers that changes their expectations of returns convenience. By partnering with a customer-centric post-purchase carrier that makes returns simple, easy, and dare-I-say “fun”, brands can win over customers and gain word-of-mouth advocates. From there, building out an efficient recommerce chain allows brands to cycle inventory back into service in a cost-effective consolidated manner while gaining major economies of scale.
Using returns to drive revenue
Restricting returns is not an effective way to reduce the amount of returns—it only drives customers away in the long run. Instead, brands should emphasize the returns messaging upfront and make it a key element of their sales process. The faster companies can process returns, the more they stand to gain from resale opportunities—especially for seasonal merchandise like apparel.
Nordstrom’s legendary return policy which puts customers in the center with friendly return windows and case-by-case exceptions is a prime example of how having a “wow” returns program creates customer loyalty. They have been able to build customer satisfaction and loyalty through repeated positive interactions regarding returned products, attracting positive word of mouth which resulted in repeat purchases. Such policies invite consumers to take a chance on products they might otherwise hesitate to buy, especially online.
To create a streamlined returns process, retailers need a logistics partner that can provide customers real-world flexibility and partner with brands to rethink their recommerce supply chain. At Veho, for example, we're seeing that when you make returns as easy as possible and facilitate trust between the consumer and the brand, those consumers return to order again and again. Our customers, which range from selling apparel and accessories to food and packaged goods, see a 19.2% increase in customer repurchase, a 41% increase in customer lifetime value and an eight-point increase in net promoter score when partnering with Veho and the “wow” moments we create for both delivery and returns pickup experiences.
We are witnessing a dramatic acceleration in ecommerce and a stressed supply chain. Customer demands are changing in front of our eyes, which makes it the perfect time for brands to meet the moment and invest in seamless returns. Instead of creating barriers, brands should think about how they can create a transparent, upfront, and risk-free post-purchase experience that will improve conversion and keep customers coming back.
Eric Swanson is the chief commercial officer of Veho.
