Try Before You Buy: Great Opportunity or Ecommerce Returns Tsunami Risk?

In 1997, when ecommerce was just a baby, an acceptable delivery time for an order was a week or better; now it’s one or two days (thanks Amazon!). However, it’s only the most notable among many  challenging customer expectations.

Shoppers also like to check a lot of stuff out and kick the tires before pulling the trigger. Try before you buy (TBYB) is a growing strategy that plays on this tendency and can increase ecommerce sales. But like many other approaches it’s a two-edged sword.

On one hand, the average basket size of an ecommerce order increases 22% and consumers will buy 3-5 more items per month if TBYB is available, according to research from Brightpearl. On the other hand, the rate for ecommerce returns can be 3-4x higher than for store purchases. Combine that with increased shipping costs, and most retailers freak out about their shrinking margins.

So how do you take advantage of the TBYB opportunity while escaping the potential pitfalls?

At Ecommerce Operations Summit 2019, an expert panel discussed their winning strategies: Sara Arthrell, product marketing manager at Brightpearl; Lalan Shrikam, founder of ecommerce marketplace Malabar Bay; and David Sobie, CEO of Happy Returns. Here are seven tips they offered on improving your returns process and instituting TBYB.

Tip #1: Get ahead of the problem by identifying the reasons for returns

Are customers being sent the wrong product? Is the product information on your website misleading? Identifying and resolving these issues is the best way to cut reduce them and cut costs.

In 2017, Malabar Bay had a return rate of 11%. The company analyzed its site search results and realized that sizing charts were slightly off from industry standards. By correcting this, adding more detailed product info and smoothing out some operational issues, its return rate dropped like a stone to 2.6%.

Tip #2: If you have a high return rate, slow down and take a closer look at margins

Before implementing something like TBYB, you need to understand your margins. Otherwise, the risk will always outweigh the potential reward. If you have a lower return rate and a close eye on your margin, you should proceed, but cautiously.

Margins are critically important. Save yourself some time and prioritize it now.

Tip #3: Avoid margin erosion with a calculated free shipping (and returns) threshold

This is still entirely acceptable practice, and will ensure that you stay in the black while still meeting the customer expectation of free shipping.

Tip #4: Use alternative ecommerce returns methods to lower costs and improve the customer experience

Using postal returns is the least efficient way to get products back and customer’s least favorite part of ecommerce. Directing them toward more cost-efficient return methods is a win-win.

With customer acquisition costs on the rise, retention is more important than ever. You need an alternative to mail, since 85% of shoppers who have a bad return experience won’t shop with you again.

Tip #5: Lower your return costs instead of passing a fee onto the customer

Consumers today don’t want to pay for anything, so you need to get creative about how to lower ecommerce returns costs on your end. Here are a few options:

  • Personalize your return policies based on customer behavior, i.e. cut off serial returners, offer preferential policies to your best customers, etc.
  • Charge customers a subscription to get access to exclusive features like TBYB; Amazon and REI both take this route.
  • Add 25 cents to each transaction or product to boost profitability.
  • Transform returns into exchanges through automation. For instance, if someone wants to return a shirt because it’s too big, give them an exchange option at no cost.
  • Reroute returns earlier in the process. If you know someone’s sent back a low-value item, dispose of it early instead of wasting time and money getting it back to the warehouse.
  • If a customer wants to return an item, offer them a small discount if they keep it. Know your margins, and make an offer that saves you more than the cost of accepting and processing the return.

Tip #6: Invest in a WMS and centralize your data

Sync your warehouse with your back office and pool the data in one place to increase efficiency and competitiveness. You’ll be able to reduce operational errors and identify trends in real time in order to always make the right decision.

With that data, drill down to the individual product level to identify issues with your returns and correct them.

Tip #7: Automate everyday operations so you can manage by exception

Automate as much as you can of your order management, inventory management and ecommerce returns process. This not only improves efficiency but allows you to focus more attention on growing your business.

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