Holiday returns season is here. Turn it to your advantage.
A higher volume of sales during the holiday season means a higher volume of holiday shopping returns. So, whether retailers like it or not, they will likely face a deluge of returned gifts. The rise of online shopping and easy return policies have both pushed up return rates, according to returns management firm goTRG.
The NRF reports that customers sent back nearly 17% of the total merchandise they purchased in 2022, totaling $816 billion. In 2023, total merchandise returns for the retail industry amounted to $743 billion, of which $173 billion is forecast to be returned by the end of January.
Delivery firm ZigZag predicted ‘the biggest-ever wave of January returns’ in 2024 and reported that, as of early January, returns had increased by 42% year over year. Returns particular to Christmas (from December 24th to January 2nd) increased by 16%. Of returns made during Christmas, 48% were paid returns. Said ZigZag CEO Al Gerrie, “This influx of returns at the beginning of January is not surprising in the current economic climate and indicative of how consumers are trying to keep spending down.”
Many (Un)Happy Retail Returns
Returns squeeze retailers’ bottom lines, can have negative environmental consequences, and open retailers up to the potential of fraudulent returns. The expenses associated with dealing with the logistics of returns often surpass an item’s worth, to the point where 59% of retailers are telling customers to just keep some items; about 27% have decided that applies to anything priced $20 or less, according to goTRG. Here are the true costs of returns for brands and retailers:
- For every $1 billion in sales, the average retailer incurs $145 million in returns
- For every $100 in returned merchandise, there is $10.40 in return fraud
- Costs of retrieving, shipping, processing, and (sometimes) restocking returns amount to an estimated 66% of the price of a product
- Companies lose about 50% of their margins on returns.
Once willing to absorb these costs for the sake of customer convenience and loyalty, the balance appears to be shifting for retailers, leading them to rethink their return policies.
- 81% of merchants now charge a fee for at least some methods of returns
- In the last 12 months, nearly half of retailers have gone so far as to implement return fees for the first time
- Some retailers have restricted free returns to loyalty members only
- Some have targeted online orders that are more prone to returns with fees, says RetailDive
According to logistics provider Happy Returns, “Return policies matter to shoppers—even before they browse. In fact, 81% of shoppers review return policies before shopping with a merchant for the first time, and 61% are even more likely to consider return policies before making a holiday purchase online.”
Done right, returns offer a win-win for consumers and retailers. Here’s how to turn returns into an opportunity to replace lost revenue with increased customer loyalty and spending.
Turn Retail Returns into Post-Holiday Sales
With nearly 60% of consumers saying stricter return policies will deter them from making a purchase, returns offer retailers an opportunity to strike a balance between customer loyalty and the bottom line.
“…a well-oiled returns system can aid inventory management and foster excellent customer experiences,” says Amena Ali, CEO of returns management platform Optoro.
Most consumers returning items in-store will do additional shopping. Presented with flexible, clear, and concise return policies—and enticing, well-targeted post-holiday sales—consumers are more likely to stay and spend.
Features such as extended return windows, free exchanges, or instant store credit, are appealing to customers. But whatever your store’s return policy, the post-holiday returns season can be an opportunity to re-engage with customers and create a loyalty-expanding, positive experience that buoys both customer spend and retention.
For instance, gift-card-waving shoppers will be looking to spend more than the value of their cards. One survey found that customers plan to spend an additional $84 of their own money during these shopping trips.
Furthermore, they are expected to extend their “holiday” shopping into February to seek savings during January clearance sales, and sales for Valentine’s Day, Presidents’ Day, and Martin Luther King, Jr. Day.
To take full advantage of this extended “return window”, retailers should focus on collecting data to identify customer expenditures and shopping habits. This understanding can lead to the best post-holiday sales promotion solutions that re-engage customers for the long term.
These practical tips will help you make it all happen*:
- Reduce customer and purchase friction by being transparent about your return policies – both online and in store. Offer convenient return options at a variety of price points so consumers have choices, and you can offset high return costs. Make it a win-win.
- Avoid punitive or preventive return policies that can hurt the customer relationship.
- Encourage continued shopper spending with a continuous rollout of discounts and sales, including flash sales and sales themed to the upcoming seasonal holidays just after the new year. Create “fear of missing out” (FOMO) by showing how many of certain items are left in stock on product pages or how many people have browsed that item.
- Leverage social media to drive in-store foot traffic by announcing the availability of new product offerings or popular re-stocked items.
“Once you know who a customer is, you can personalize their shopping experience, which has been proven to increase brand satisfaction, loyalty, and the likelihood that customers will make repeat purchases.”
- Invite all those new or irregular customers to join your loyalty program.
- Personalize the customer experience by making recommendations on products related to previous purchases. According to McKinsey, cross-selling and category-penetration techniques increase sales by 20% and profits by 30%.
- Clue customers into special-themed events and in-store, immersive experiences. Engaged customers will come away with positive memories that result in a desire to share good online reviews, and a greater sense of trust in and excitement about your brand.
- Regard gift card use as the chance to increase average order size and encourage customers to purchase items that complement their product choices. Certain accessories and peripherals can support and enhance many product categories.
- Considering that many consumers are disappointed in the holiday gifts they received or are on the lookout for enhancements to what they did receive, be ready to assist customers in discovering the items that will make them happy.
- As always, keep collecting and analyzing customer data so you can successfully monitor and respond to their shopping behaviors—including their preferences about returns—in ways that encourage loyalty.
- Since 95% of consumers look up reviews before they make a purchase, it behooves retailers to request feedback and reviews from customers. Plus, asking for reviews keeps the retailer/customer relationship going.
- Keep your brand front-of-mind with all those new customers but wait until after the holiday inundation slows about mid-January. Send a personalized message designed to encourage the customer to interact with your brand—for instance, by filling out a survey, using a time-sensitive discount coupon, becoming a subscriber, or leaving an online review.
“Merchants that provide clear, concise return policies right out of the gate may win over customers before they even start to shop. An easy-to-access and easy-to-understand return policy may boost shoppers’ confidence and turn browsers into buyers.” – Happy Returns
Level up your returns and customer experience strategies to drive sales and revenue, post-holidays and beyond.
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