Product Returns By The Numbers That Businesses Should Not Ignore
Product returns are part of a business’s sales cycle, but how common are they? What can businesses do to deal with them properly? This post has the answers.
In a perfect trading world, a company sells its products, and the customers are happy with what they receive. In reality, businesses deal with hundreds of product returns every year.
For this reason, many business owners are investing in tools such as an RMA application to help manage such returns. Still, it pays to know the severity of returns, especially in e-commerce, to understand the value of proper management.
1. Cost of Product Returns
Product returns are expensive for both customers and retailers. A report by IHL Group revealed that companies lose over $550 million each year to returned products. Returns in North America accounted for almost $200 billion. The problem was so pervasive that the report called it the “ghost economy.”
Meanwhile, the cost of returns can make up as much as 30% of the product’s purchase price. It means businesses only a small percentage from the sale. Customers are also paying a lot for it.
The rate of returns can vary across industries. It seems to be the most common in fashion. One of the reasons is the wrong size. However, a new sales tactic called self-service may also be a cause.
In self-service, companies allow consumers to choose products they want with the least assistance or intervention from sales professionals. While this is empowering, it also increases the risk of wrong purchase decisions.
2. Cart Abandonment
Cart abandonment happens when Internet users close the checkout page before they even made a purchase. No official statistics can say how common this is, but the percentages reported were high. For example, Barilliance believed it could be 78.65% in 2018.
The rate could also vary across regions. Overall, the average rate in 2019 was 77.73%, but in the United States, it was 71.86%.
Either way, every time a user closes the checkout tab, the business loses the chance to make a sale. Understanding the factors that drive cart abandonment then becomes essential. So far, surveys reveal that it’s not always about the price.
At least two more factors can significantly affect a buyer’s decision, and these are shipping and product returns. An infographic showed that 67% of online shoppers would check out the returns policy first before they buy. Over 90% of consumers would also buy again if the store has easy-to-follow returns regulations.
3. Consumer Preferences on Product Returns
Contrary to popular belief, customers understand the risks of buying, especially if they did it online. That’s why they read returns policies in the first place. They also know what they want when it comes to the methods of product returns:
- Customers want a hassle-free policy. One of the most popular is the “no questions asked” plan. Brands like Ikea are famous for that.
- About 47% of consumers want an easy-to-print return label.
- Some like the returns policy to determine who pays for postage and shipping, as well as the kinds of products they can send back.
- More than 50% of online customers will buy a product that they can return in-store.
Managing Product Returns
Product returns are a part of the sales cycle. The question is, how can businesses reduce or use them to their advantage?
- Investing in RMA application programs to automate the returns process
- Providing multiple returns channels (for example, they can return the products in-store or businesses can pick them up from consumers)
- Setting clear, understandable, and reasonable terms and conditions for returns (for example, they may return products no questions asked within a month from the date of purchase)
Dealing with product returns can always be nerve-racking. If businesses do them wrong, then they incur losses. The good news is they can also work with them correctly and use these as opportunities to provide better customer service that can translate to sales.