Noticed your returns skyrocketing recently? There are a number of unforeseen circumstances contributing to this shift (from a global pandemic to a widespread cost-of-living crisis). Many brands are already taking drastic actions, but before we get into that, how did this all come about?
Well, online shopping boomed during the pandemic when no-one could visit shops in person. This led to lenient returns policies that would encourage continued spending throughout the uncertain period. Lenient returns policies = more customers returning items.
More recently, the cost of living crisis has reared its ugly head and forced consumers to tighten their purse strings. This means that if products aren’t perfect and shoppers aren’t 100% sure about them, they’ll give in to purchase regret much more quickly and look to get a refund as soon as possible. Increased purchase regret = more customers returning items.
What you might now know however, is that over 90 percent of customers make repeat purchases based on a company’s return policy alone. So the stakes are high!
It’s interesting to see just how differently various retail businesses are tackling the topic of returns. Some of the most popular brands, like Zara, are making all customers pay to return items. Other companies, such as Chewy, have gone in the complete opposite direction, letting consumers keep unwanted purchases to avoid returns altogether.
While these responses are completely polarized, the one thing they do have in common is that they’re applying the same policies across the board. And we see a problem with this. Unfortunately, a ‘one size fits all approach’ simply doesn’t work! Treating all your shoppers the same will have a detrimental impact on the valuable relationships that you’ve spent so long building with your loyal customers. So why not try something different?
Brands should take a personalised approach to returns and offer varying refund options based on the CLTV of their shoppers. For example, ask your one-off purchasers to pay to send items back while offering your repeat customers a more VIP experience, such as free returns.
You can even use loyalty program tiers to reward your top tier members with the best returns options – for example, free return pick up – making it far more desirable for shoppers to carry out the actions needed to reach this level.
Alternatively, you can think of fun and innovative ways to help your customers get rid of unwanted items themselves without returning them at all. LuluLemon encourages customers to trade in their clothes to a local store so that they can be refreshed and resold to someone else. In return, the customer receives credit to spend in store. Confidence in the brand grows as shoppers cash in on items they don’t want, and so LuluLemon benefits from increased customer retention on top of the original sale!
Your own approach to returns may depend on how much of your profit margin you can afford to give up, but by tiering your solution you can limit this risk while protecting yourself from the financial impact of free returns for all, or the reputational damage of free returns for nobody.
Step one is to identify your most valuable customers – LoyaltyLion’s Insights and Customer Value Snapshot can help you with this. Step two is to deliver the best possible returns experience to those VIP customers, to ensure they keep returning to shop again, and maybe even tell their friends how easy it was to return items to your store. Our custom rules can help you deliver the right returns strategy for each customer segment, keeping it personalized and slick every time.
While brands are taking radical blanket measures to tackle the surging rate of returns, we think you’re missing a trick if you don’t use this opportunity to reinforce customer retention by rewarding your most loyal shoppers. For more tactics that will make immediate improvements to your lifetime value, retention rates, and customer relationships, sign up to the LoyaltyLion Academy.
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