Customer Service
Consumer satisfaction and the end of free returns
For retailers, the last mile has become an important extension of their brand. For logistics providers, fulfilling last-mile deliveries has become a substantial business driver.
April 13, 2023 by Jorge Lopera — Vice President, Head of Global Strategy, FarEye
As e-commerce takes hold of the retail industry, last-mile delivery will continue to become a larger focus for retailers and logistics providers. For retailers, the last mile has become an important extension of their brand. For logistics providers, fulfilling last-mile deliveries has become a substantial business driver.
Online retail has created an environment where retailers can no longer compete on price and product alone. Shipping terms such as costs, delivery speed, accuracy, visibility, tracking and carbon emissions all tie into the retail product being offered. Further, last-mile delivery now offers retailers new ways of customizing tailored shopping experiences. Those that can cultivate more robust, personalized relationships with their consumers during last-mile delivery through responsive communications and proven reliability stand to gain brand loyalty and future sales.
However, delivery isn't just a one-way street. Online returns are a key consideration among consumers when deciding where to shop. A poor returns policy or poor returns experience can deter consumers from shopping with a retailer, to begin with, or shopping with them again. The trouble with online returns is that they are inefficient, complex and incredibly costly. And to provide great consumer experiences, many retailers are shouldering the cost of returns themselves.
Online returns and the consumer experience
Globally, around 30% of online orders are returned, compared to 9% for items purchased in-store. This gap is due mainly to the inability of consumers to see, feel and try on many of the goods they are buying online. This inability to experience products before purchase has also contributed to a recent practice known as bracketing, where consumers order multiple variants or sizes of a product to only keep one and return the rest. This costly practice makes it challenging for retailers to balance offering convenience and flexibility to consumers while minimizing the costs of their own return.
Consumers are driven to shop with online retailers that offer clear returns policies, convenient locations to return items, clear communication and visibility of returns statuses, and fast refunds. Poor returns policies, slow refunds and lack of returns visibility deter consumers from shopping online retailers, as do short return eligibility time frames, as 82% of UK consumers expect to be able to make a return in 30-90 days from purchase.
Flexibility in how consumers can return online orders is also critical, and retailers must offer multiple return methods to cater to varying consumer preferences. The most preferred returns methods by UK online consumers are returns via the post office (preferred by 44% of consumers), returning orders in-store (preferred by 35% of consumers) and returning orders via home pick-up (preferred by 11% of consumers).
Minimizing costs for consumers can be a competitive advantage, and according to our recent study, 52% of European retailers offer free returns on all or almost all of their orders today. But with costs for retailers high and 68% of UK consumers willing to pay at least £1 for returns, free returns may be more trouble for retailers than they are worth.
How to ensure returns expectations are met
Creating superior returns experiences requires close coordination among consumers and retailers. Today, innovative technology platforms enable efficient returns processes that create fast, flexible and sustainable returns to consumers and low-cost, resource-light processes for retailers, ensuring both parties are satisfied.
Many last-mile delivery platforms used by retailers today feature returns solutions that allow retailers to automate the scheduling, carrier selection and routing processes while giving them complete visibility over the status of returned orders that they can then share with consumers. In addition, these tools give retailers more control and predictability of online returns, which can help inform their returns policies, reduce costs, improve returned merchandise handling and offer faster refunds.
The result? Superior returns experiences for consumers and lowered costs for retailers.
Why free returns may not be here to stay
Online returns are estimated to account for 60% of the sale price of a standard £50 order. Many times, merchandise must be written off and discarded, and there are cases of fraudulent returns, where consumers send back incorrect items or items that have been worn repeatedly. Fifty-seven percent of retailers claim dealing with returns has a negative impact on their business, while 20% would increase the price of their products to make up for the cost of processing returns.
To both mitigate these costs and deter returns from the start, many retail companies in the U.K. are beginning to charge consumers for online returns. Retail group THG — which owns brands including Lookfantasic, MyProtein and Glossybox — now charges £2.99 per order for returns. Mountain Warehouse, another retailer, introduced a £2 fee late last year.
With more than two-thirds of UK consumers willing to pay for online returns, there is a case to be made that the age of free online returns may have already passed. Retailers may instead begin focusing on the returns experience to please consumers and compete for their business.
About Jorge Lopera
