The Secret to Long-Term Customer Loyalty Is an Easy Return Policy

Online businesses must plan for returns as a pillar of their brand's larger customer experience.

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By Maria Haggerty


Opinions expressed by Entrepreneur contributors are their own.

At least 30 percent of all products ordered online are returned. While this number may sound alarming to online retailers today, a high return rate is not always a direct threat to a company's bottom line. It's important to remember that returns are simply the cost of selling online and retailers can minimize the effect of returns by effectively managing the reverse logistics process.

In the past, business owners believed that making returns as difficult as possible would ultimately reduce them. However, hindering the return process does nothing more than leave customers unhappy and unwilling to purchase from your brand again. This is especially true for ecommerce industries like apparel.

Related: 6 Steps to a Return Policy That Will Score You More Sales

Instead, online businesses must plan for returns as a pillar of their brand's larger customer experience. Here's why:

1. You'll foster loyalty.

An easy and transparent returns policy creates a high level of trust and comfort with shoppers. Due to unavoidable eCommerce barriers like not being able to try clothes on before purchase, consumers must have confidence in your returns policy or they will not convert.

To develop a trusted returns policy, focus on convenience and communication.

  • Convenience can come in many fashions. For example, a preprinted return label can facilitate the reverse logistics of making a return, making it easy for customers to return an item from their own mailbox or neighborhood UPS or FedEx. Sixty-two percent of shoppers want the option to buy items online and then make returns in-store, but when the convenience factor of returning via mail is as easy, if not easier than going in-store, consumers will trust your returns policy and order with fewer reservations.
  • One way to improve communication is by sending your customers notifications throughout the entire returns process -- from when a return has arrived, to when it has been processed, and ultimately to when the credit has been issued. Customers will inevitably have questions about their returns, and it is more expensive and time-consuming to access and distribute information after a request than it is to proactively communicate returns statuses with shoppers in real time.

As it can cost five times as much to acquire new customers than to maintain business with existing customers, loyalty is critical to your brand's bottom line and long-term growth. Consistent communication and convenience during the returns process directly contributes to these metrics.

Related: 5 Keys to Building Your Ecommerce Site

2. You'll gain actionable marketing insights.

In addition to providing a seamless and valuable customer experience, a strategic returns policy can help businesses uncover actionable customer insights. This crucial information can be used to execute the following marketing strategies and ultimately drive more sales long term.

  • Inventory and product development. Returns are a great opportunity to become smarter about what you sell. For instance, if an unusual amount of customers are returning clothing items because they are too large, you can identify a possible sizing issue with your manufacturer. Likewise, if shoppers return a high volume of turquoise purses, perhaps you have a coloring issue with your online display. Gathering information on the return side can help your identify trends and issues with your products and make the necessary improvements for future sales seasons.
  • Upselling. At the point of return, you can work with shoppers to transform potential returns into future business opportunities. For example, a customer may be open to exchanging his or her product for another size or color when given the chance. You can also upsell shoppers by communicating promotional codes or ongoing sales at the point of return.
  • Personalization. Data generated from returns can offer unique insights about your customers that can inform personalization efforts. For instance, brands should work hard to retain customers who have returned a small portion of their orders through special offers and loyalty programs. Alternatively, a shopper who has placed many orders and returned almost all may not warrant the same outreach. Here, big data insights can help brands effectively personalize marketing content. .
  • Social Media. A seamless returns policy can positively influence your brand on social, while a bad customer experience can seriously damage your brand reputation. Shoppers are willing to share great returns experience with their friends and family, and as 92 percent of consumers say they trust this kind of word-of-mouth marketing (WOMM), a single positive returns mention on popular social channels like Facebook and Twitter can lead to many more sales opportunities with new customers in the future.

Related: A Smart Retail Return Policy Is Much More Than Free Shipping

As ecommerce continues to grow (U.S. ecommerce sales alone are forecasted to reach $535 billion in by 2019), returns policies will only become more critical to maintain long-term customer relationships. By effectively managing the reverse logistics process, retailers can drive customer loyalty and gain actionable insights that power marketing campaigns. With the many hidden benefits of a robust returns policy, returns are an aspect of ecommerce that brands simply cannot afford to ignore.

Maria Haggerty

Founder and CEO of Dotcom Distribution

Maria Haggerty is the driving force behind Dotcom Distribution’s third-party logistics team. Since co-founding Dotcom Distribution in 1999, she has played a critical role in developing and defining all aspects of the business, including sales and marketing, operations, finance and IT.

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