Strategising Returns: Balancing Policies and Customer Experience

Category: Operations
Strategising Returns: Balancing Policies and Customer Experience

Doriel Abrahams, Principal Technologist at Forter discusses strategies for balancing returns policies with customer experience:

In the ever-changing world of retail, the surge in returns abuse poses a significant challenge for merchants. Retailers often find themselves in a dilemma to curb this trend while preserving a positive customer experience.

The holiday season is a prime example: retailers rejoice at soaring holiday sales, only to face the daunting aftermath of a bloated in-store returns queue, directly impacting the bottom line.

A recent survey of UK consumers revealed a startling fact: an alarming number of consumers openly admit to exploiting return policies for their benefit. This underscores retailers’ need to grasp consumer attitudes towards returns and respond effectively.

Wardrobing and generational trends

Wardrobing, sometimes referred to as “free renting” or “use and return” is a phenomenon where consumers buy items for temporary use and then return them – a prevalent problem experienced by merchants. Surprisingly, over half (56%) of UK consumers admitted to wardrobing somewhat recently. 73% of these UK consumers are part of households with a child. Furthermore, the trend was not isolated to any specific vertical, spanning everyday items like apparel, footwear and electronics.

Moreover, this type of return abuse is notably prevalent among younger shoppers. Over three-quarters (81%) of UK returns abusers are Millennials and Gen Z, between the ages of 18 and 34. Retailers specifically saw a rise in deliberate returns abuse from younger shoppers during the 2023 holiday season, with 52% of UK Millennial and Gen Z respondents stating they intended to wardrobe some of their holiday purchases.

Retailers are losing revenue

The fiscal impact is staggering. Retailers saw a whopping $743 billion in merchandise returned in 2023, according to a recent NRF and Appriss Retail report. Over 49% of retailers cited wardrobing as a reason for returns in the past year. In 2023, retailers saw $101 billion in losses due to return fraud. They lose $13.70 to return fraud for every $100 of returned merchandise.

As a result, many companies use a variety of tactics to curb returns abuse, which may include:

  • Restrictions: Many companies add limitations to their return policies to curb abuse. For example, a company might offer a short window for return, like 14 days. Most consumers prefer a 30-day return window and want flexibility in the returns process.
  • Blacklists: Some companies create a blacklist containing the names of customers no longer allowed to return items to their stores. These lists constantly evolve, and sometimes legitimate customers wind up on a blacklist in error.
  • Rules-based systems: Many businesses use a rules-based solution that flags transactions for manual review based on specific criteria. These systems often lead to a tangled mess of overlapping rules, resulting in false positives.
  • Charging for returns: Many companies have started charging customers for online returns. However, consumers have grown accustomed to free returns, so many won’t take kindly to paying to return items to stores.

These approaches can help prevent people from abusing return policies but often lead to a negative return experience.

The cost of a negative experience

Retailers must balance preventing return abuse and providing outstanding return experiences. For most modern consumers, the online shopping and return experience is about convenience, ease and speed.

Some of the previously-mentioned methods employed to curtail returns abuse often alienate new customers — and cause churn with existing ones. The surveys found that 72% of UK consumers will stop shopping at a brand if their returns policy becomes overly complicated. Additionally, more than half of UK (58%) consumers will stop buying from a retailer that charges for returns.

Companies that tighten or complicate their return policies risk losing a significant amount of revenue, which includes the potential lifetime value of each lost customer. Once you lose a customer, winning them back is extremely difficult.

Enhancing experiences without compromise

Understanding each user’s identity is the key to controlling returns abuse – without alienating good customers. Clearly understanding the online identity behind the transaction or identities like it, you can identify fraudsters and policy abusers, stopping them before they purchase. It can provide every deserving customer with a top-notch returns experience with confidence.

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