While most of us were busy taking down the Christmas decorations during the first week of January, many others were returning those wrong-sized or otherwise unwanted gifts. That’s why UPS predicted that it would return more than a million packages to retailers on Jan. 6, 2016.
Accordingly, UPS designated this “National Returns Day,” the year’s busiest day for returns. By the end of the first week of 2016, we anticipated processing more than 5 million return packages – 500,000 more than this time last year.
Data collected on UPS’s year-over-year return volume from 2012 to 2015 shows savvy consumers are returning items earlier, creating two return peaks, with the first spike in mid- December and the second in early January. Analysis suggests Cyber Weekend purchases are frequently bought for personal use and returned in mid-December, while December purchases are typically holiday gifts that trigger a January returns spike.
Although the final returns results for this holiday season aren’t in yet, we expect this trend to become even more pronounced this year as retailers continue to push promotional efforts earlier in the season. One outcome: A significant impact on financial results for retailers. Everyone from the C-suite to Wall Street focuses on sales revenue upticks, but that’s only one metric. If 25 percent to 30 percent of those sales come back, you didn’t make as much as you thought you did. And you have a double hit: Not only have you lost a sale, but you have to deal with the cost of the returned merchandise logistics cycle.
While this isn’t the best of news for retailers, it’s definitely the reality. Studies show the expense of returns processing can range anywhere from 20 percent to 65 percent of the cost of goods sold which amounted to 8.8 percent of total channel sales in 2014, or $284 billion.¹ The key questions are how quickly can you get a return item back, what shape is it in when it arrives, and how can you best recover maximum value?
Retailers have traditionally focused on outbound sales and the forward supply chain, but haven’t paid much attention to returns as a strategic priority. But that’s changing in today’s omnichannel environment, because the way returns are managed and communicated can have a high impact on consumer satisfaction, brand reputation and a retailer’s profitability.
Saving the Sale
While many retailers are best advised to opt for a customer-friendly “no questions asked” approach with a pre-printed label in the box, others should consider the opportunity to save the sale. Consider the classic “some assembly required” scenario, in which a customer gets frustrated and just tucks everything back in the box to return it. How can this be prevented?
For high-value purchases or items that might be hard to assemble or operate (such as electronics), retailers should consider placing a “speed bump” in the process, requiring customers to call for a Return Authorization. At that point customer service staff can probe for the reason behind the return, walk them through the “how-to” steps, and prevent the return. Sure, it’s an extra step in the returns process that may not be appropriate for many products (such as apparel), but it provides a better customer service experience and the sale is kept on the books.
Satisfying Shoppers Is the End Game
One of the eye-opening results from our survey of online shoppers is 83 percent of shoppers are satisfied with their overall shopping experience, but only 62 percent are satisfied with online returns. The UPS Pulse of the Online Shopper™ study shows that, when given a choice, 61 percent would prefer to return purchases to a physical store instead of shipping it back.
This has the attractive side benefit of driving more sales, as 70 percent of those returning to a store say they have made another purchase. UPS’s 2015 white paper, Rethinking Online Returns, indicates that many retailers aren’t taking full advantage of this trend by neglecting to promote the option to return online purchase to a nearby store location.
With these challenges and opportunities in mind, it’s important for retailers to develop an online returns strategy that balances both customer service and cost. What’s more, retailers shouldn’t have to scale these growing returns peaks alone. Find a reliable partner that can provide you with all your returns strategy needs.
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