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Free stuff: Returnless refunds can define the customer journey

Experts say sellers that enable easy returns and refunds processes better retain customers

Kohl’s accepts Amazon customer returns. According to Narvar, brands that make the returns experience easier and speed the refund process have a better chance at retaining that customer. (Photo: Kohl’s)

This holiday season is expected to be even better than the blockbuster 2020 season, with new research from Deloitte predicting holiday retail sales will increase between 7% and 9% over 2020. E-commerce is expected to grow between 11% and 15% this year, reaching at least $210 billion and as much as $218 billion. Total retail sales are forecast to be $1.28 trillion to $1.3 trillion.

“We anticipate strong consumer spending for the upcoming holiday season. As vaccination rates rise and consumers are more comfortable being outside of the home, we are likely to see increased spending on services, including restaurants and travel, while spending on goods will continue to hold steady. A steady decline in the savings rate to pre-pandemic levels will support consumer spending and keep retail sales elevated this season,” said Daniel Bachman, Deloitte’s U.S. economic forecaster. “Further, e-commerce sales will continue to grow as consumers demonstrate an ongoing and steady movement toward buying online across all categories.”

That’s the good news for retailers and e-commerce shippers. The bad news? An increase in returns. The returns experience plays a large role in the overall customer experience and can make or break a future sale.

“With the acceleration of e-commerce from COVID, what we’ve also seen is an acceleration of returns,” David Morin, senior director of retail and client strategy at post-purchase technology company Narvar, told Modern Shipper.

Morin said brands need to optimize their reverse logistics networks, looking at them “from the retailer’s lens while also helping the consumer.”

Narvar surveyed 1,000 shoppers to understand the returns experience and found that 75% had been offered a refund without having to return the item.

“It is actually cheaper to give shoppers the refund versus having to facilitate the return,” the survey noted. “Both the shipping and other operational costs that go into a return tend to be more expensive than the actual item shoppers purchased so retailers are willing to just take the loss on the item and avoid a bigger loss in facilitating the return.”

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For the customer, the experience is often a positive one, with 87% reporting that this approach makes them more likely to shop with that retailer again and 40% saying they would recommend the retailer to others.

“That is an emerging trend where certain retailers for certain consumers are not having to send the item back to get the refund,” Morin noted.

Amazon (NASDAQ: AMZN) is one company that often does this, depending on the value of the item, but survey respondents also noted Walmart (NYSE: WMT), Target (NYSE: TGT), Wayfair (NYSE: W), Chewy (NYSE: CHWY), Wish (NASDAQ: WISH) and Kohl’s (NYSE: KSS) as others.

In a separate survey, found that 45% of consumers would rather return an item to a store than deal with return shipping. Consumers also want transparency, with 32% saying they want regular updates on their return; 45% expecting a notification when the return arrives at the warehouse; and 50% demanding updates on when the return is expected to be processed and the refund issued.

“Following last year, the 2021 holiday shopping season will certainly be challenging,” Tobias Buxhoidt, co-founder and CEO of parcelLab, said. “A key opportunity from our report this year is that retailers must communicate with their customers throughout the journey – whether that will be a delay or other issue or creating a better returns experience to improve the customer relationship – harnessing these touch points will build trust and loyalty for 2022 and beyond.”

“We think a lot about the future of returns having a very personalized returns experience,” he said. “The best retailers will continue to have diversified return methods. We are getting to a place where just having one method, like standard mail, is not the best returns method.”

David morin, senior director of retail and client strategy at narvar

Sometimes the returns are the company’s fault, with 23% of parcelLab’s survey respondents saying they received incorrect items. Most stats point to an e-commerce return rate between 20% and 30%. With e-commerce exploding, that means $42 billion in e-commerce orders could be returned this holiday season.

Morin said there is hope to better manage this process and turn a potentially negative situation into a positive outcome for brands.

“We think a lot about the future of returns having a very personalized returns experience,” he said. “The best retailers will continue to have diversified return methods. We are getting to a place where just having one method, like standard mail, is not the best returns method.”

Amazon customers can bring items to Kohl’s for instance. Just this week, Happy Returns announced a deal with Staples to allow customers to return online orders to Staples stores without the need to box the item. FedEx (NYSE: FDX) has a deal with Walgreens to pick up returns for certain items, and UPS (NYSE: UPS) partners with CVS (NYSE: CVS) to do the same.

Morin said the use of QR codes is helping improve the process.

“More and more consumers are utilizing printerless [options],” he said. “We’ve seen an increase in adoption of QR codes. The best-in-class retailers are really diversifying [their offerings].”

In some cases, as Amazon has done with Kohl’s, the digital retailer can partner with a physical store to facilitate returns. Narvar offers an easy option for its customers, allowing them to simply turn on the option for paperless returns in their e-commerce platform.

There are two parts of returns, Morin noted – the logistics of the return and the payment. In 2021, the logistics are a big question mark due to capacity concerns within carrier networks and issues with ensuring that item – which may be limited in stock due to global supply chain disruptions limiting quantities – is in a location where it can be sold again.

“How do you [engineer] that reverse logistics network to get the item back to where it is most likely to be sold again?” he asked. “You really have to think about how you optimize that reverse logistics.”

The other part of the equation is refunding the customer. Many brands refund the customer after the item is received in a warehouse, but in a tight capacity environment, that return may be delayed in its arrival. Morin suggests brands look at how they can improve the refund process.

“Is there a way to refund your customer earlier on in the shipping journey once the shipment is in the [carrier network]?” he asked. “How do you personalize the experience?”

Solving the refund process, Morin said, is crucial to satisfying the customer.

“The primary thing we think about is the customer experience and how do you make it a great customer experience,” he said.

Click for more articles by Brian Straight.

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Brian Straight

Brian Straight leads FreightWaves' Modern Shipper brand as Managing Editor. A journalism graduate of the University of Rhode Island, he has covered everything from a presidential election, to professional sports and Little League baseball, and for more than 10 years has covered trucking and logistics. Before joining FreightWaves, he was previously responsible for the editorial quality and production of Fleet Owner magazine and Brian lives in Connecticut with his wife and two kids and spends his time coaching his son’s baseball team, golfing with his daughter, and pursuing his never-ending quest to become a professional bowler. You can reach him at [email protected]