The return rate is one of the most important analytics for eCommerce store owners, yet many online retailers don’t take return rate into consideration when assessing store performance. While many retailers focus on revenue as a key metric in online store performance, 75% of over 300 sellers we surveyed reported they are focusing on the bottomline.
How Returns Impact Retail Bottomline
Returns can be a complicated subject for omnichannel retailers. Handing eCommerce returns requires coordination and reliance on logistics and supply chain resources.
Customer Service Cost of Handling Return Requests
Customer service staff are front-line workers when it comes to product returns. If your store doesn’t have a returns portal, return requests are likely fielded and handled manually over email. Every time a customer requests a return, customer service staff must pull up the order to see if it’s within the return policy. Having a returns portal eliminates this overhead because orders are automatically reconciled with the return policy settings, and return requests that don’t adhere to the acceptable return window can be easily denied. An intelligent returns management platform like EcoReturns can also offer customers options to exchange or keep the product instead of returning with incentives, which not only reduces the time required from customer service staff, but also can improve customer experience with returns handling and reduce returns.
Logistics and Supply Chain Cost of Returns
Returns hit the supply chain hard. The cost of sending products out when they’re purchased as well as receiving them back and assessing them requires significant time and resources.
Forward Logistics Cost
Products that are returned have already gone through packaging, fulfillment, shipment and delivery. Forward logistics are a sunk cost when considering the cost of returns.
Reverse Logistics Cost
Returns that are approved in many cases are shipped back to the warehouse for inspection, repair, and potential resale. Many retailers require the customer to cover return shipping costs, but customers have reported they are deterred by a return policy with this requirement. As free shipping is integrated into product pricing, covering reverse logistics costs in the case of returns improves customer satisfaction. Once products are received at the warehouse, quality inspection workers unpack the returned item and assess it for potential resale. Accuracy is important in quality inspection, as products that are resold with defects by mistake become future returns, and products discarded that are resellable are lost revenue.
Many online brands with inventory warehouses perform quality inspections and grading manually, which takes considerable time (and therefore overhead). Using an intelligent returns automation solution like Saara’s Quality Check app reduces labor spent on grading returned products without sacrificing quality. Because AI doesn’t get tired, quality inspections can be done in under a minute with high accuracy.
Wastage from Returned Goods
Typically, about half of products that are returned to online retailers are deemed unusable. While many retailers are trying to implement upcycling, second-hand, and recycling programs, the impact of returns wastage is significant for both the environment and profitability. Know here the impact of returns on the environment and how to fix it.
How to Calculate Your Store’s Return Rate
If you are receiving returns but aren’t sure how returns re impacting your balance sheet, we’ve created a handy online store returns calculator to value the loss in revenue you experience from returns. This is a great first step in identifying the impact returns are having on your store’s bottom line.