Omnichannel return models help retailers keep customers but at what cost?

A positive returns experience is critical for retailers to retain customers. A recent survey by Optoro found that 42% of consumers decided to never again shop with a retailer with which they had a negative returns experience. Customers also say they want several return options. Approximately 80% of respondents to a recent National Retail Federation survey (pre-COVID-19) said they prefer to make returns in-store. Yet due to COVID-19, there may be a reduction of in-store returns this year and a commensurate increase in shipped returns.

Many retailers’ returns policy is a competitive differentiator, especially during the holiday season, and has become increasingly important to attract and retain customers. For example, Happy Returns—a software and reverse logistics company—provides a service for customers to return online purchases at an in-store kiosk. Some retailers without physical locations have partnered with brick-and-mortar retailers, allowing customers to return items in the store. Amazon offers free returns for Prime members in more than 1,150 Kohl’s locations.

Optoro reports that 97% of consumers will buy from a retailer again after having a positive returns experience.³ The company also found that by incentivizing customers to exchange rather than return purchases, they can maximize profits and increase order values by as much as 32%.

Higher cost of returns

Although many customers expect a free returns policy, the cost to return items is significant for retailers. Optoro reports that the costs of customer care, transportation, processing, discount loss and liquidation loss can conservatively amount to 59% of the sale price of a $50 item. Providing customers the option to return their online purchases in-store can lower call center, transportation, processing and discount costs. Nevertheless, significant investment in technology is needed for retailers to seamlessly process returns and correctly reposition them for sale.