By Pratik Gupta, Special to Gulf News
In the world of online shopping, returns are a crucial part of the customer experience as well as the financial model of the e-commerce company.
The existence of a returns policy is the single biggest factor for converting a doubtful first-time customer into an online shopper. That’s the reason it’s a boon for the customer as well as the business. It makes the customer relaxed and ready to try.
When the customer visits the online shop knowing there is nothing to lose, they get pleasantly surprised to see hundreds of thousands of product options, home delivered and usually at better prices than offline.
For the online business, returns give a huge push to sales. While it does hurt margins if the boost to sales is good enough, the absolute profit only increases. It is important for the online business to make sure that the returns policy is not a dummy and doesn’t have too many conditions attached. Ninety-nine per cent of customers are honest and some companies make the mistake of creating a policy for stonewalling themselves from the 1 per cent customers who tend to misuse the policy by returning too much, which harms the experience for the other customers.
Most companies ask customer to send pictures of the products, ask several questions, then wait for approvals to accept the return and then delay in refunding.
Many customers just get tired of calling the customer care and pursue their case and eventually decide to forget about the return and swear to never buy online again.
To eliminate this, we introduced a no-questions asked returns policy, which allows the customer an option to not answer any questions and not send any pictures and just execute the return without any extra approvals. It led to a spike in positive feedback on social media, a spike in sales and, surprisingly, almost negligible increase in return cases.
Of course, we have our checks and balances but we always give the benefit of doubt to the customer. So it’s become quite clear to us that the majority never orders with an intention to return, but just need an assurance of a good return policy in case something goes wrong. So if the customer gets what he ordered and delivery time is good, the customer would return.
Returns can also be a bane to customer and the business. For the business, returns are a very complex and difficult animal to tame and if badly managed, it will definitely do more bad than good.
Returns in an online business can be classified into non-delivered returns (NDR) and customer-initiated returns (CIR). In a usual online business, the overall returns will be close to 15 per cent of sales with 50 per cent attributed to NDR and CIR each.
NDRs occur due to customers changing their mind because they bought the same product from elsewhere at a better price, couldn’t wait any longer or simply found a more suitable style or configuration. Other reasons can be attributed more to the operations of the company, like a delay in delivery, not able to locate the address, not able to make contact with customer due to bad coordination of field executives, etc.
Top reasons for a CIR are difference in specifications like colour, style, material, etc. of the products received or manufacturing defects. The CIR and NDR-returned products enter again into the warehouse through a reverse logistics supply chain. Unopened or sealed boxes go back live on the website and the others are liquidated at very low costs to factory outlets, seconds retailers, scrap, etc. at less than 25 per cent of the original cost.
The ones that go back live on the website have to be sold at a loss due to erosion of price in the market with time. That’s why returns make a huge dent on your balance-sheet if not managed properly.
It’s quite clear that the online company has a lot to do to make sure returns are minimised. That’s the reason e-commerce companies invest heavily in sourcing partnerships, technology, warehousing, logistics to make sure products are not only of great quality but are also accurately described on the portal and delivered quickly.
We have invested more in creating a strong technology platform, fulfilment centres, warehouses and a last-mile delivery fleet rather than giving loss-making discounts to customers. The money that we save by achieving low returns is integrated into the prices.
This makes sure our customers get the best product, price and services leading to not only higher repeat purchase but also a low return rate. This strategy has also made us reach very close to operational profit in two years, while companies are struggling even after five or 10 years in the region and globally.
To summarise, it’s important for online ventures to watch out and fix their return rates before they expand. It’s probably the key to make or break their customer satisfaction and financial performance.
The writer is the Co-founder of Wadi.com.
