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Explore the balance between managing operational costs and enhancing customer loyalty in this guide to e-commerce returns
♪ “Return to sender, address unknown.” ♪
Elvis serenaded us with the challenges of returned letters, yet in the world of e-commerce shipping, the melody takes a different tune. Balancing both the customer experience (CX) and operational costs presents a unique obstacle for many retailers, manufacturers, and 3PLs during peak season and the months after. As we explore the challenges of returns, let ProShip’s experts uncover the factors affecting companies around the world. Here, returns aren’t just about misplaced addresses; they’re about managing financial intricacies, enhancing customer loyalty, and leveraging advanced supply chain technologies like Multi-Carrier Shipping Software (MCSS) for a seamless returns operation. Join us in exploring the layers of returns management and discovering how MCSS plays a pivotal role in balancing these competing concepts.
The Cost of Returns
Returns aren’t just about products coming back to the warehouse – they carry a substantial financial weight. Restocking fees, shipping costs and potential losses add up, forming a significant part of the financial tribulations associated with returns.
Restocking Fees
Beyond logistical challenges, restocking fees often come into play for shippers. Retail technology company, Narvar, shares that approximately 40% of retailers have implemented return fees in 2023. These fees are often charged to customers returning items and are intended to cover the costs associated with processing and restocking returned goods. However, managing restocking fees requires a delicate balance, as excessive fees can lead to customer dissatisfaction.
Shipping Costs
The workflow of getting products to customers is mirrored in reverse during the returns process. Shipping costs associated with returns add another layer to the financial impact. It’s not just about outbound shipping – it’s also the cost of bringing the product back to origin. The shippers, during a dynamic shipping landscape influenced by factors like the General Rate Increases (GRIs), must carefully consider these expenses in their returns management strategy.
Potential Losses
In some cases, returned items may not be suitable for resale at their original price, or even at all. This could be due to damage, wear and tear, seasonality, or many other factors. According to a 2023 report from logistics technology company Optoro, processing a return can cost retailers as much as 39% of the original price. This underscores the financial challenges associated with returns, emphasizing the importance of evaluating the condition of returned items and determining their value (or lack thereof) as a critical aspect of returns management.
According to a Pitney Bowes BOXpoll survey of online retailers, the average cost of returns for US retailers is approximately 21% of the order value, with almost half paying even more. This statistic stresses the financial impact of returns on businesses, making it a crucial aspect to address.
Additionally, more than two-thirds of the retailers surveyed said they are trying to do something to lower their returns transportation and processing costs. Understanding these financial complexities is key for shippers seeking effective returns management.
Customer Experience and Loyalty
The returns process is a critical touchpoint in the customer journey, significantly influencing customer satisfaction and loyalty. When customers encounter a seamless and efficient returns experience, it not only fulfills their immediate needs but also contributes to a positive CX and overall favorable perception of the brand. On the other hand, an inconvenient and unclear returns process can lead to dissatisfaction and destroy brand loyalty.
Consider this: a satisfied customer, even in the face of a return, is more likely to become a loyal, repeat customer. Positive returns experiences are closely linked to brand perception, and customers who feel valued and supported, even during the returns process, are more likely to remain loyal in the long run.
Ultimately, CX and loyalty are intricately connected to how a company handles returns. As we consider the challenges of returns management, understanding customer expectations and building processes that prioritize their satisfaction becomes crucial. [Keep Reading → Maximizing Customer Satisfaction: Mastering Returns During the Holiday Season]
When Returns Are Worth It
While returns are often viewed as one of the most challenging aspects of the supply chain program, savvy shippers understand that, when executed carefully, returns can be transformed from a liability into a strategic asset. One key aspect is recognizing the opportunities where accepting returns can benefit the business.
Vijay Ramachandran, VP of GTM (Go-to-Market) Enablement + Experience at Pitney Bowes, highlights a paradigm shift in the approach to returns. “Many retailers—starting with those most sensitive to seasonal merchandise with a short shelf-life, like fast-fashion brands—have introduced returns fees or new sources of friction in the returns experience in the last year in an effort to mitigate rising costs.” While this approach may provide a temporary solution for some, a more sustainable strategy involves embracing returns as a customer perk.
“While this environment provides aircover for other retailers to do the same, we recommend an alternate route: Using your returns programs as a customer perk can be a game-changer. There’s a lot of momentum right now in loyalty programs, since the cost of acquiring new customers continues to grow. Offering more convenient returns features—like free return shipping, faster store credit, etc.—to your best and most loyal customers drives more value to your loyalty program…and in turn, more repeat business for your brand.”
–Vijay Ramachandran, VP of Go-to-Market at Pitney Bowes
By leveraging returns as a customer perk, businesses can not only enhance the overall CX but also build stronger brand loyalty. Providing convenient returns features to loyal customers, such as free return shipping and faster processing of returns, contributes to a positive brand perception and encourages repeat business. [Learn more about how brands win with Pitney Bowes and ProShip.]
Best Practices for Efficient Returns
Returns are an integral part of the e-commerce lifecycle, and it’s clear that how companies manage them can significantly impact their bottom line and customer satisfaction. To ensure you manage the complexities of returns efficiently, consider the following best practices:
Offer Convenient Exchange Options: Instead of focusing solely on refunds, consider providing customers with convenient exchange options. Ramachandran shares that retailers often assume that a refund is the only resolution for a customer who isn’t satisfied with their order. He goes on to say that offering something as simple as free exchanges—especially paired with a fee for returns without an exchange—allows the brand to keep the revenue and that while the market has been hyper-focused over the last few years on speeding up the refund process, that often results in the consumer taking their money to another retailer. In fact, according to a Pitney Bowes BOXpoll survey, a significant 56% of consumers express a preference for more convenient online exchanges. Surprisingly, fewer than 20% of retailers currently offer a straightforward way to process exchanges on their websites.
Clear Communication and Transparent Policies: Establishing clear and transparent return policies is crucial. Customers should easily understand the return process, including conditions, timelines, and any associated fees. Transparency builds trust and helps manage customer expectations, reducing potential friction in the returns process.
Streamlined Returns Process: Simplify the returns process as much as possible. Offer customers a user-friendly experience that guides them through the necessary steps, reducing the likelihood of errors and improving overall efficiency. By focusing on ease of use, companies can enhance the CX and encourage repeat business.
Prioritize Communication: Keep customers informed at every stage of the returns process. Provide timely notifications when a return is started, received, and processed. Clear and proactive communication not only encourages confidence with the customer but also minimizes the likelihood of additional inquiries.
Leverage Technology: Integrate advanced technologies, such as Multi-Carrier Shipping Software (MCSS), into your returns management system. Learn more about how MCSS streamlines the returns process, from label generation to tracking, ensuring a seamless experience for both customers and businesses in the next section.
The Role of Multi-Carrier Shipping Software (MCSS)
Returns management is a delicate balance between satisfying customers and optimizing operational costs, and a key partner in coordinating this is Multi-Carrier Shipping Software (MCSS).
How Returns Fit into the Tech Stack
As customer expectations evolve and brands try to keep pace, technology is their backbone to streamline operations. Returns are no exception. To truly understand the role of MCSS in returns, you must understand how returns fit into the broader Enterprise Software Stack (ESS) of an e-commerce business.
Elite MCSS solutions seamlessly integrate into your existing tech infrastructure, creating a cohesive ESS that handles various components of both outbound shipping and returns. This includes connections with Order Management Systems (OMS) for efficient order processing, Warehouse Management Systems (WMS) to optimize inventory handling and Enterprise Resource Planning (ERP) systems to ensure streamlined business processes.
From order placement to delivery and, crucially, the return journey, MCSS acts as the single source of truth and execution of shipment processing. This ensures the smooth flow of both information and delivery actions across the entire tech stack.
What is MCSS
Multi-Carrier Shipping Software is a supply chain solution designed to simplify and optimize shipping processes. Top-tier solutions include advanced functionalities like automated business rule management, Advanced Date Shopping, and a broad carrier library to support enterprise businesses. Beyond its role in outbound shipping, MCSS is a versatile tool that plays a pivotal role in managing returns effectively. It’s the powerhouse that coordinates carriers, shipping rates, and routing decisions, ensuring that returns are not just a logistical challenge but an opportunity to exceed customer expectations and garner customer loyalty.
How MCSS Streamlines the Return Process
MCSS’s impact on returns management is comprehensive and powerful. Here’s how MCSS streamlines the returns process:
Label Generation: MCSS goes beyond just simple solutions by seamlessly generating return shipping labels, eliminating any resistance for customers initiating a return. This approach ensures that the returns process continues with precision and efficiency, aligning with broader streamlined initiatives. [Discover How Multi-Carrier Shipping Software Can Help Avoid Labeling Errors.]
Automated Routing Decisions: MCSS excels in automating routing, utilizing predefined business rules that cater to both complex and straightforward situations. This means that returns are directed to the most optimal location, carrier, or service, streamlining the reverse logistics process, and minimizing shipping costs. This not only minimizes shipping costs but also aligns with omnichannel fulfillment initiatives. By seamlessly integrating into the broader supply chain strategy, MCSS enhances the overall efficiency of handling returns while contributing to the success of omnichannel fulfillment strategies. [Check out The Parcel Pro’s Guide to Omnichannel Fulfillment]
Visibility: MCSS doesn’t just handle returns; it provides valuable visibility into the process. Through seamless integrations in the ESS and with Business Intelligence (BI) solutions, companies can gain insights into return patterns, reasons for returns, and overall return performance. This data-driven approach empowers businesses to make informed decisions, offering advanced business rule functionality for deep customizations, optimizing processes across the ESS, and providing market intelligence for key stakeholders. All these benefits add up to improved customer satisfaction and operational efficiency. [Learn more about ProShip x MyShipINFO]
The Future of Returns Management
Nearly all shippers would agree that returns management demands finesse to strike a balance between customer satisfaction and operational costs. As we’ve explored these complexities, the key takeaway is focusing on the tools that can help you achieve the delicate equilibrium that successful companies maintain. Achieving a seamless returns process enhances customer loyalty while efficiently managing financial intricacies.
The future of returns management promises further advancements, with a continued focus on leveraging advanced technologies like MCSS to refine and optimize the returns process. Streamlining operations, gaining actionable insights, and enhancing the overall CX will be at the forefront. As companies adapt to these trends, returns management will become an increasingly integral part of the e-commerce landscape.
Striking the right balance between customer satisfaction and operational costs requires a strategic approach, and with ProShip’s expertise in the realm of MCSS, companies can easily navigate this with precision. For a seamless returns process that excels in speed, compliance, and flexibility, choose ProShip’s Multi-Carrier Shipping Software. Our industry-leading solution is designed to simplify your supply chain, providing dedicated, expert support and adaptability. Elevate your returns management strategy with ProShip and experience the difference that cutting-edge technology can make in enhancing customer satisfaction and operational efficiency.
For a personalized consultation on how ProShip’s Multi-Carrier Shipping Software can unlock the full potential of your e-commerce returns, contact us today. Let’s transform the challenges of returns into opportunities for your company’s success!
Special thanks to Vijay Ramachandran, VP of GTM (Go-to-Market) Enablement + Experience of Pitney Bowes for his assistance and contributions to this blog.
