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In the past 24 months, you have experienced multiple operational pivots and changes within your retail store. With each shift, you have worked diligently to provide a positive consumer experience while remaining as profitable as possible. If you’re like many retailers, returns have been a challenge during the pandemic. In fact, 40% of retailers say that they adjusted their return policies to better manage the volume and restrictions around returns in this shifting business climate. With the start of the new year, now is a good time to review and refine your existing return policies for both online and in-store sales to better protect your bottom line while enhancing the return experience for your shoppers.

5 points to consider as you review your return policies:

1. Rising return rates erode your store’s bottom line.

With shrinking margins and an increased focus on profitability, retailers are seeking new strategies to improve their bottom line. Approximately 6%-10% of all returns in the U.S. are dishonest transactions – and each fraudulent return means lost revenue. Common schemes include manipulating receipts or prices, wardrobing, making purchases with illegitimate checks, returning stolen merchandise, and employee-facilitated theft. Fraudulent returns take a large financial toll on U.S. retailers – up to $25+ billion annually, at an average of $5.90 per $100 in returns. Reducing return fraud and its associated costs will help you improve profitability.

Appriss Retail’s research found that a shopper with a long-term pattern of returning more than 20%-30% of the products they purchase can hurt your profitability.

While it’s smart to focus on the impact of fraudulent returns, even legitimate returns hurt your store’s profitability. Each time an item is returned, an employee must spend time processing the return, evaluating the item’s resale potential, and restocking the item. Often, returned products must be discounted for resale or thrown away, which increases losses.

Appriss Retail’s research found that a shopper with a long-term pattern of returning more than 20%-30% of the products they purchase can hurt your profitability.

2. Traditional return policies tend to allow fraudulent and excessive returns.

Return policies usually limit the amount of time allowed for a return and require proof of purchase; however, these policies do not consider who makes the returns. By moving to a consumer-based return policy approach, you can make strategic decisions for specific consumers who have red flags in their transaction history with your brand. Even more interesting is that you can treat your best customers with more generous return policies, improving their shopping experience and satisfaction, while heading off those shoppers whose behaviors negatively impact your bottom line.

3. Your best shoppers make the most returns. 

It may sound counterintuitive, but your highest-spending, most valuable consumers make the most returns, and they are typically legitimate returns. Thus, a strict or rigid return policy can be a source of friction for your best consumers and can lead to a negative shopping experience and shopper attrition. By revising your return policy to account for the 73% of consumers who are omnichannel shoppers, you can deliver a positive return experience regardless of how the consumer prefers to purchase, receive, and return items, while enabling easy transactions via BOPIS and BORIS.

4. Consumers often review a brand's return policy before buying.

Research by Incisiv shows that 60% of shoppers check the return policy of a brand before making a purchase decision. Even more important, 49% of shoppers chose not to make a purchase because of the retailer’s return policy according to that same study. This can lead to abandoned carts online or shoppers leaving your store empty-handed, possibly never to return.

Every day that you rely on using a traditional return policy, you risk losing money and hurting profitability. By acting now to refine your approach to your return policy, you can improve the consumer experience for your shoppers while improving your profitability — a “win- win” for everyone.

5. A return authorization system makes it easy to put a consumer-based policy into action.

By using a return authorization system, your employees can automatically determine if the shopper has a high rate of returns. Unlike the receipt verification tools found in typical POS systems, the return authorization system provides additional benefits including:

  • Decreased return rate and total return dollars
  • Increase in net sales and operating profit
  • Decrease in inventory shrinkage

The return authorization system uses consumer IDs from the specific retailer’s data to create a database with a purchase history for each shopper at that specific retailer. When a shopper attempts to return an item, the return authorization system alerts the employee to the shopper’s history and recommends accepting/declining the return. Your employees can then focus on providing top-notch service instead of second guessing the validity of a return from your valuable shoppers. Since only about 1% of consumers make excessive or fraudulent returns, this consumer-based policy will not adversely affect the majority of your shoppers.

Every day that you rely on using a traditional return policy, you risk losing money and hurting profitability. By acting now to refine your approach to your return policy, you can improve the consumer experience for your shoppers while improving your profitability — a “win- win” for everyone.

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Author

Tom Rittman, Vice President, Marketing, Appriss Retail

Tom Rittman, vice president of Marketing at Appriss Retail, is responsible for all aspects of branding, marketing, and business development. Prior to joining Appriss Retail, Tom served as the vice president of marketing for Datavantage, a retail technology company that is now part of Oracle. He holds his bachelor’s degree in Marketing from the University of Akron.

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