Returns are the cost of doing business, but how can you minimize this cost without risking customer loyalty? There are two goals in mind when tackling returns: minimizing returns overall and maximizing margins on the returns you do get.
According to Shopify, the return rate for e-commerce brands was 20-30% in 2022, peaking at 30% over the holidays. The adoption of free returns from brands encouraged costly consumer behavior, and now brands are looking for creative strategies to manage these costs while retaining happy customers during the peak shopping season.
Kathleen Sullivan Garman, Founder & CEO of SullyGarmen and Associate, moderated a discussion on the state of returns for e-commerce brands and solutions to combat them with these industry professionals:
Jake Disraeli, Co-Founder & CEO of Treet
Bailey Newton, Founder & CEO of Frate
Doreen Banaszak, COO of Burju Shoes
Shakarah Dean, Sr. Manager of Logistics & Operations at Kirrin Finch
Let’s dive into some of the highlights:
Q: Returns are one of the biggest concerns for brands leading into the holidays. What returns trends are you observing this upcoming holiday season?
Jake Disraeli, Treet: Brands are focusing on returns now more than ever, especially due to the growing impact on margins and profitability. While consumers increasingly expect easy and free returns as the norm, brands are experimenting with different ways to deal with returns, such as charging for returns, optimizing product pages with more info to help customers make smarter decisions, and reselling returns through branded resale sites. There is no clear standard approach yet, so brands are currently in experimental stages.
Bailey Newton, Frate: It’s becoming increasingly common for some consumers to abuse lenient return policies. For brands, a large majority of their returns probably comes from a pretty small cohort of customers, and the goal is to identify those customers and change their behavior.
Doreen Banaszak, Burju: Returns were an issue for us because shoes would come back scuffed and couldn't be resold as new, so Burju had to invest time and money into cleaning and processing returns. This caused friction between our brand and our consumers when it came to returns. The problem got worse as free and easy returns became more common in e-commerce, leading to greater customer expectations. Our brand felt stuck between industry trends toward easy returns and the need to reduce costs and friction.
Q: Managing returns can be an entire job in itself, especially during the influx of the holiday season. How are you quantifying the impact and the resources your brand dedicates to returns?
Doreen Banaszak, Burju: Burju Shoes uses a 3PL and was seeing 60% of returns unable to be resold, creating waste. Despite using a returns provider, our return rate kept climbing.
Shakarah Dean, Kirrin Finch: Kirrin Finch is constantly analyzing costs of using a 3PL vs. in-house processing. We examined our processes to optimize return handling time by creating an in-house returns assembly line to increase efficiency, extending return processing timelines to allow more thorough Q&A, and increasing staff to keep up with returns volume. As a business, knowing the numbers and costs is crucial for managing returns.
Q: With an industry average of a 20-30% return rate across ecommerce brands, how has your brand reduced returns? What tips do you have for brands trying to lower their return rate?
Doreen Banaszak, Burju: Burju Shoes brought our 22% return rate down to 11% by attempting to own our full product lifecycle. Creative solutions to combat returns included blind box sales to give damaged goods a second life, partnering with ReLift for better sizing technology to reduce mis-sized orders, and linking with Frate to enable image verification on returns to reject unacceptable ones. And if their return was rejected, we offer them a resale alternative through our Treet-powered resale site. The key was giving customers options when it comes to returns and providing as much information about the product as possible.
Jake Disraeli, Treet: When considering changing return policies, like charging for returns, brands need to improve the customer experience elsewhere. You can add value on the front end with sizing tools, user reviews, or improved sizing guides to reduce returns. You can also offer alternatives on the back end, like offering branded resale solutions, so customers have options besides just returning. Offering resale can create another path outside the returns process without jeopardizing the customer experience. The goal should be limiting returns while still keeping the consumer top of mind.
Q: How can Treet and Frate be an asset to brands trying to combat returns this holiday season?
Bailey Newton, Frate: Frate redirects returns to the most cost-effective destination by assessing the condition upfront. The portal prompts customers to take photos so the condition can be assessed before it's shipped back. We mitigate returns by not allowing customers to start the process if outside the return window or for final sale items. For items in perfect condition, we incentivize the customer to hold onto it for 5 days while Frate tries to resell it directly. This saves warehouse processing costs. For lightly worn items, we redirect customers to resell on Treet instead of doing a return. For poor condition items that can't be resold, we tell the customer they can't issue a refund since the item was worn. This saves the return shipping cost. Customers are receiving options when it comes to returns through Frate.
Jake Disraeli, Treet: Treet helped brands launch customized resale programs for their customers, offering peer-to-peer resale, brand-direct resale, and trade-in programs. Many brands are setting up Treet now to help manage returns during the holiday season, using resale as an alternate option for their customers. Treet handles all customer service for the resale and returns processes, reducing the work for your brand’s customer service teams and improving the customer experience.
Returns don't have to be the enemy - with some strategic thinking, brands can turn returns into an opportunity. Burju Shoes, Kirrin Finch, Frate and Treet demonstrate that a customer-focused, sustainable and collaborative approach can transform returns from a cost center into a value-driving process. While the work is ongoing, these initiatives provide an inspiring model for brands looking to optimize returns in a win-win manner.