1. Understand the costs of returns
Before a brand defines its returns policy, it’s important to understand the associated operational costs. Whether managing international returns, offering exchanges in addition to refunds, or establishing agreements with carriers, clarity on these details is essential.
You need to consider the following associated costs:
- Operational costs for processing each return, from handling the product to its inspection, refurbishing, or even discarding if the product is damaged.
- Reverse logistics costs, largely defined by the transportation needed to collect returned products from the customer, whether from a convenience point or their home, to the warehouse or distribution center.
- Storage costs for holding returned products, which can increase inventory costs and associated management efforts.
Another often overlooked cost is the time the Customer Support team spends managing return-related inquiries or issues. Common queries like "Where is my refund?" or "Where is my order?" directly impact a brand's profitability, as Support teams must address these issues, leaving less time for other important tasks. To avoid this, automated return solutions can greatly help.
"One of the most significant outcomes we've achieved with Reveni is a 50% reduction in messages related to reverse logistics. Currently, this entire operation is managed through the Reveni platform, which also provides us with information on which model is most frequently returned, the reasons, and which products receive the most exchange requests. This allows us to act quickly and, for example, review and modify the size guide," say Morrison representatives.
2. Optimize your supply chain
Enhancing your entire supply chain process is key to maximizing your brand's profitability. Achieving an efficient operation that effectively manages your reverse logistics, optimizing your supply chain, and reducing lead times and costs is essential.
Integrating a returns and exchanges management solution that enhances your reverse logistics is crucial to achieving this.
At Reveni, we not only automate processes but also optimize them thanks to our industry knowledge and operations expertise. We provide brands with the data they need to make returns and exchanges a strategic part of their business. For example, understanding why customers return items is essential for making business decisions such as improving product descriptions, adjusting size guides, or even seeking new suppliers.
3. Understand the loss of value of your products after a return or exchange
From the moment a product leaves the warehouse en route to the customer, it loses value, similar to how cars depreciate once they leave the dealership. If the customer then requests a return or exchange, the product loses even more value, depreciating further, which especially impacts products in the fashion or technology sectors.
This forces many brands to define their discount strategies and even rely on outlets and discount-focused marketplaces to resell these products, directly reducing their profit margins.
4. Prioritize the impact of customer satisfaction
Efficient returns management can improve the customer experience. As mentioned in our State of Returns 2024 report, 9 out of 10 customers wouldn’t shop again at an ecommerce store after a poor returns and exchanges experience.
Offering an optimized process that meets customer expectations fosters loyalty, creating a community of engaged customers who repeatedly shop at your ecommerce store. This boosts the repurchase rate, positively impacting long-term profitability, as recurring customers are much more profitable than acquiring new ones.
Additionally, keep in mind that poor returns management can damage the company's reputation, potentially reducing future sales.
5. Implement strategies to reduce returns
As mentioned earlier, having a solution that improves the returns and exchanges process while providing data on this operation helps you make business decisions that directly impact profitability. For example, you can:
- Review product descriptions, images, or even add videos showing the product in action. Providing this information reduces the likelihood of returns.
- Promote instant exchanges over returns, making it easier for customers who want to return a product because it's too large or small to opt for an exchange instead. This helps manage stock and offers a better customer experience.
- Improve quality control to ensure that the products shipped meet quality standards, minimizing returns due to defects.
- Establish clear and fair return policies to reduce the volume of unwanted returns.
In summary, returns management is a critical factor for maintaining and improving a brand's profitability. Efficiently managing this process can reduce costs, enhance customer satisfaction, and ultimately increase net profits.