Smart Returns - "You never get a second chance to make a first impression."
Hillary Mendelsohn, Author of thepurplebook: The Definitive Guide to Exceptional Online Shopping

One thing more precious than a sale itself is a repeat customer. Whether online, catalog or offline, return policies play a major role in the consumer’s mind when purchasing an item. This element of the decision becomes even more important when the consumer is making the purchase online or over the phone, and has not had a chance to touch and feel the item in person. Though this may not seem like a revelation to most, we now have solid and undeniable proof that it is not only the policies that matter, but also the ease and convenience of the return process that matters most to the consumer. With the recent results of the Harris Interactive "Study About Returns," Online stores and Catalogs must address the real issues of consumers to attain the repeat customer.

Online sales are poised to grow 20% this year alone and are forecasted to continue at this rate until 2010. U.S. online sales will reach $145 billion this year - or 7% of total U.S. retail sales - which represents a 26% gain from the $114 billion in 2003. This year it is estimated that 42% of American consumers have shopped online. Catalog business remains strong, even as more players are getting into the game, and often inspire online purchases. With the ‘Shop Direct’ business growing at such a fast pace, the only major hurdles to the loyal repeat customer, are security and customer satisfaction. Thankfully, security is being handled responsibly, both by the online retail world as well as the credit card companies. But customer satisfaction is the area that has the most room for improvement, particularly in the area of returns, according to the study.

The New York Times mentioned an astonishing fact that a consumer is six times more likely to be a loyal repeat customer to an e-tailer IF they have a positive experience with an online site as opposed to a bricks and mortar store. That ‘IF’ is definable in terms of satisfaction with selection, price, delivery and returns. The interesting element of the equation is the consumer thinks about the potential return before the purchase is made, and may be discouraged by the purchase if that return is not fair, convenient and easy.

Harris Interactive conducted a Study on Returns polling 1,026 adults (513 women, 513 men) between the ages of 18 to 65+, living in households across the United States. The information is current and timely, as the study was completed November 29, 2004. But the numbers tell only part of the story. With the proliferation of high-speed connections, the ever-growing internet savvy population on both ends of the age continuum and the retailers delivering better and smarter customer service, online shopping is poised to be the largest growth sector for the retail market for the foreseeable future. That imposes great responsibility on the e-tailers to deliver on all accounts. Those that establish themselves early as quality merchants, thereby earning the consumer’s confidence and loyalty, will be the big winners. Your best publicity is word of mouth from a satisfied customer.

Returns strongly impact the purchasing decisions of consumers.
The purchase may be the draw to the site, but ultimately it is the confidence that the site itself instills in the potential customer that seals the deal. 79% of the respondents polled felt that the prospect of a merchandise return was a ‘very important’ or ‘somewhat important’ factor in the decision to make an online or catalog purchase. Breaking down the elements of the return process, Convenience (80%) and Ease (80%) topped the list as the element greatest concern (‘very important’ and ‘somewhat important’), followed by Cost (76%), Speed (68%) and Tracking (61%). Of those polled 92% stated if a return was convenient they would be ‘very likely’ or ‘somewhat likely’ to shop with that merchant again; whereas only 13% would shop with a merchant where they had experienced inconvenient return methods. The return policies must not only be spelled out, but a site must advertise or market that its return policies and process are easy and convenient. This greatly affects the purchaser’s decision to press the submit button. Many sales are lost after the shopping cart is full if the return policy and process is not adequately addressed. A consumer will likely choose another retailer with a smartly integrated return system over one that does not. As returns are one of the highest considerations when making a purchase, it is vital that the retailing community recognizes the paramount importance and necessity of a viable and consistent returns management system. Attention to this element has a direct correlation to a loyal repeat costumer.

Intelligent returns equal smart business.
With returns being a constant element of the retail environment, it is essential for the retail community to embrace quality return practices not only for the consumer, but such intelligent returns practices are equally as important on the retail side as well. The Study articulates this best finding that 79% of the respondents make returns in a year period, (most of them between 1 and 5 annually). If the return can be made convenient and easy for the consumer, the retailer becomes a more efficient machine able to process those returns in a much more timely, efficient and effective manner. Of those polled 88% of the respondents complete the return process within three months. 33% likely to want to exchange merchandise, 24% more likely to ask for a refund and 40% equally likely to ask for either. This means that the retailer again has the opportunity to make a good impression. Accounting, quality control, projections and sales figures all become more accurate thus streamlining business to accommodate such figures and findings. Should a series of returns that are turned around by an efficient system recognize that a particular product is defective, such an expedient finding benefits both the consumer and the retailer. Should there be an issue of general dissatisfaction with a particular item, the decision processes can be addressed in a much more timely and effective manner.

Returns provide an additional avenue of communicating with the consumer.
Retailers should not look at returns as a negative. Returns provide not only the opportunity to accommodate and impress the consumer, but also, an additional channel of communication. Creative retailers can use this additional channel of communication to entice and induce. Promotions included in the returns process are a fabulous opportunity to reach out to a customer who clearly likes what you have to offer. Of those polled 51% would be ‘very likely’ or ‘somewhat likely’ to respond to an incentive offer. Such an offer is best utilized online or with a catalog order according to the study, where only 21% would be interested in using a promotion in-store. The return process does not have to be a burden for the consumer – it can prove to be a great benefit to both the consumer and a great asset to the retailer. Returns are one of the most effective ways of getting quality information and suggestions from the consumer population at large. Take this opportunity to ask good questions and listen to what your consumer has to say. Whether it is a complaint, which can be rectified into a positive outcome, a suggestion that you may not have thought of or a compliment that can be used as a testimonial – information directly from consumers is valuable, and you have their attention when they are returning something.

Invest in returns and see the bottom line grow.
Many companies do not want to invest in the infrastructure necessary to create such a streamlined returns system. Those that choose not to address the importance and necessity of incorporating such a program will lose the confidence of the consumers. Even if a company does not have the ability to effectuate such a program themselves, this can be an excellent opportunity to outsource. The investment will not only be worthwhile, it will be a necessity to future growth, earnings and revenues. 92% of those surveyed said they would be ‘very likely’ or ‘somewhat likely’ to shop with a merchant that had a convenient return process. Your reputation is everything, and in the competitive world of retail, you cannot afford to ignore the facts.

A satisfied customer is a loyal costumer.
As innovation and implementation of return method and management progresses, the percentage of the customer satisfaction rate and consequently the customer loyalty rate will increase. The Harris Interactive study not only confirms this, but underscores the importance of accommodating the consumer in the clearest, simplest and most convenient manner possible. The less effort the consumer has to make in the return process, the more satisfied they will be, and the more likely they are to become a loyal repeat customer. Particularly if the consumer is purchasing a gift, you are now impacting two customers, the purchaser and the recipient. Confidence and satisfaction must be achieved on both ends.

In the end, the savvy consumer favors the smart retailer – big or small.
With the serious investment of major mass market retailers into the world of online shopping, those companies who best execute and market the competitive advantages - such as easy and convenient return policies and method - will reap the rewards of the loyal consumer. This will manifest in the leveling of the online retail playing field, where it won’t matter to the consumer whether you are a large mass market established brand or a small niche retailer. The one who will earn the repeat business is the retailer that delivers on all fronts – especially with regards to easy returns.

In today’s ever-growing Shop Direct world, the demands of the consumer will shape the habits of the retailers. With so many choices, the consumer may choose to purchase on a site once – the question is what can the retailer do to make sure the odds are in their favor that the consumer will come back again? Good quality merchandise, a visually appealing and intuitive site, excellent customer service and smart, streamlined returns is a winning formula.

Should you need more information regarding corporate consulting services please email the editor@thepurplebook.com

Hillary Mendelsohn, Author of thepurplebook: The Definitive Guide to Exceptional Online Shopping