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The secret to stronger customer loyalty? Make returns easy
With returns on the rise, Veho CCO Eric Swanson highlights the importance of 'wow' moments in the post-purchase experience.
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.
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US ecommerce sales grow 8.5% in February, outpacing overall retail
US retail sales were up 5.4%, but a slowdown in some discretionary categories is emerging.
US retail sales couldn’t keep the post-holiday bounce of January going into February.
The US Commerce Department reported the following data on US retail sales totals for February 2023:
On a monthly basis, sales declined by 0.4% from January, totaling $697.9 billion.
On an annual basis, sales increased 5.4%. That’s below the January annualized growth of 6.4%.
Core retail sales, which exclude foodservice and auto-related items, grew 6.5% year-over-year and 0.5% month-over-month, according to the National Retail Federation.
Nonstore retailers, which includes ecommerce, outpaced overall sales to grow at 1.6%. On an annual basis, sales in this category grew 8.5% over February 2022.
January totals were revised upward to growth of 3.2% month-over-month. Previously, the Department said growth was 3%.
In part, the month-to-month fluctuations are a result of seasonality, said NRF Economist Jack Kleinhenz. Despite the presence of Valentine's Day, February tends to be one of the slowest months in retail as the holiday bounce gives way to a winter lull.
“Sales are higher than last year and that’s due in large part to the strong labor market, which means more income and spending," said Kleinhenz, in a statement. "We are seeing a decent trend for retail sales growth built on the upward revisions to December and January sales. Nonetheless, seasonal adjustment factors the government is applying to the monthly data to account for irregular post-pandemic spending patterns make it difficult to accurately measure the strength of the consumer.”
Still, the data offers some signals that behavioral shifts are emerging. The results offer a mixed picture at a time when stubborn inflation is continuing to drag on the economy.
“Consumers continue to dig deep to fund consumption and are showing remarkable resilience despite various unfavorable economic factors,” said GlobalData Managing Director Neil Saunders. “That said, the devil is in the detail and there are definite signs that shoppers are gradually changing behaviors to cope with higher inflation and numerous pressures on their household budgets.”
With food and rent prices elevated on top of rising interest rates, the results on a category level offer signs that consumers are cutting back on some discretionary spending in goods.
Stores that are destinations for bigger ticket purchases saw declines. Furniture stores were down 2.5% for the month and grew a slight 0.1% for the year. Electronics and appliance stores were down 2.8% for the year, and declined 0.3% for the month.
But not all discretionary categories are suffering. Clothing stores declined 0.8% for the month, but posted 4.3% growth for the year. Sporting goods and hobby stores followed a similar pattern, declining 0.5% for the month, but growing 3.9% for the year.
The categories that fit into more essential, every day needs continue to see the most growth. Grocery stores grew 0.6% on the month, and 5.6% for the year. Health and personal care was up 0.9% for the month, and 8% for the year. The latter reflects the continuing strength of beauty, which is often seen by consumers as an affordable luxury during tougher economic times.
If the predictions from retailers and economists of a slowdown in consumer spending continue to pan out this year, look for this dichotomy to continue.
The bright spot in the report comes from the category that includes ecommerce. While the growth of ecommerce slowed in 2022, the report offers confirmation that steady continued spending can keep it on an upward trajectory. Ecommerce sales tend toward the discretionary, so a sign that consumers are seeking out online channels even as they become more cautious is a welcome one.
Wholesale inflation inches down, eggs drop
A forward-looking measure of inflation showed signs of cooling in February.
The Producer Price Index, which offers data on the price of goods before they reach retail, showed the following for February 2023:
- Prices declined 0.1% overall on a monthly basis.
- On an annual basis, prices increased 4.6% from February 2022. That’s down notably from 5.7% in January.
- Prices for goods declined 0.2%, driving the decrease.
While the PPI is a one-to-one predictor of the future inflation rate, it shows signs in the pipeline that prices may be coming down. Notably, one of the most high-profile products to see inflation is finally getting some relief. Egg prices dropped 36.1%. This accounted for 80% of the decline in goods for the month, and offers a sign that price drops could be on the way to grocery store shelves soon.