Retail is grappling with a massive returns problem. Many companies claim they’re drowning in give-backs, but consumers still feel entitled to returns policies that work to their benefit.
Panelists at the Manifest logistics conference this week discussed the impact of returns on retail’s bottom line, along with the current strategies at play to reroute or repurpose unwanted merchandise while keeping consumers satisfied.
A recent report from returns software solution Loop Returns showed that 96 percent of shoppers believe returns policies directly reflect how much a brand cares about its relationship with them. Jonathan Poma, the group’s CEO and co-founder, said that brands and vendors must treat returns protocols as marketing tools. “We work with merchants to make sure that they’re pushing messaging forward into the pre-purchase flow to build confidence and conviction that you can trust the brand—especially when you’re buying for the first time online,” he said.
Loop, which works with clients like Canadian apparel company Duer, California lifestyle brand Aviator Nation and travel and luggage company Monos, has helped develop returns strategies designed to alleviate shopper anxieties and promote a smooth path to purchase. Some brands have opted to implement “risk-free” first purchases, wherein first-time buyers can receive a refund for an unwanted item without going through the hassle of returning the product.
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While the brand loses out on the merchandise, it’s a strategy that’s becoming more common as companies examine the cost of reverse logistics. Footwear firm Genesco’s director of distribution systems Leif Revere said a favorable returns policy can be a cost-cutting measure as well as a point of differentiation. Using online pet marketplace Chewy as an example, Revere said the company often asks consumers who wish to return things like pet food to donate those goods to someone in need rather than send them back to the company. Those shoppers still receive refunds.
Certain products simply can’t be resold once opened, and others may be worth more in the hands of a new, prospective consumer being introduced to the brand for the first time. Genesco is now “looking at leveraging the whole supply chain when rerouting returns,” he said. “Rather than having the return come back to a distro-center to be picked again to be fulfilled for another customer,” it might prove more valuable to “just pass it from customer to customer and build that family and that brand loyalty.”
While promoting a positive customer experience is essential, companies are also dealing with the rising issue of returns fraud—like returning the wrong item, or even an empty box, for a refund, or using or wearing an item before returning it. Their reverse management systems (RMS) need to be optimized to deal with those threats efficiently, according to ReverseLogix CEO and founder Gaurav Saran. The SaaS platform streamlines return requests, logistics, inventory and processing.
“The most important thing for the brand that is managing the whole reverse flow of the item is that they have full visibility—from the point of initiation of the return request to the time that it actually comes back,” he said. Generating a return merchandise authorization (RMA) through the portal alerts the retailer that an item is coming back to the warehouse or distribution center, preparing them for intake. “A lot of our brands are now saying that they want the ability to do and open and verify,” he pointed out. They want to make sure that returns packaged in boxes actually contain the genuine product before crediting the consumer for their return. This hasn’t always been the case—in fact, many retailers credit shoppers for their returns as soon as they’re dropped in the mail.
Genesco, which owns Journeys and Johnston & Murphy, has been looking into leveraging imagery to verify returns. Brands might consider asking a consumer to “take a picture of their shoes to compare wear and tear” against internal product photography. “We want to maintain and keep our customer base as much as we can, but we do get shoes back that you can tell were worn,” he said. In a case like that, the brand might offer a 50-percent credit on the unwanted product instead of a full return, with machine learning conducting the photo assessment and generating an explanation for the shopper about why the return cannot be processed in full.
Loop’s Poma said that the company saw over 10 million shoppers process returns through the platform last year, and examining the data reveals trends that can be useful for vendors attempting to manage “returns abuse.”
For example, the company can identify shoppers who consistently return items on the last day of a returns policy—an action that isn’t outright fraud, but is disadvantageous to the retailer. “What we can start to leverage is… the reactive measures that brands take at an individual level, and apply that to behavioral patterns we see in customers across the entire network,” Poma said. Brands might develop a “block list” for consumers that engage in repeated abuse—a measure Poma said he’s seen used more frequently in recent seasons.
“Being able to build off of the data that we have access to is going to be important in the future, because this returns abuse isn’t going anywhere,” he said.