It’s a well-established fact that the coronavirus crisis has resulted in a significant shift towards online shopping channels as brick-and-mortar stores close and consumers find themselves carrying out almost all of their shopping from home.
Indeed, recently-released data from Nielsen found that online retail sales in the UK increased by 103% in the four weeks leading up to the 16th May.
While on the surface this is good news for ecommerce and retail digital transformation as a whole, the suddenness of this shift has left many brands scrambling to adapt their digital strategies to cope with a surge in ecommerce demand.
One area in which many retailers have been forced to think on their feet is with returns – a growing pain point even before the coronavirus crisis hit. Returns policies are known to be a significant factor in consumers’ decisions to buy from a brand, with many factoring in the potential cost and difficulty of returns when deciding where to spend their money online. Retailers with free returns policies have historically reaped the benefits in terms of customer acquisition – but have also suffered from the high costs involved, as well as with customers who are serial returners, returning more items than they typically keep.
How has the recent upswing in ecommerce affected this situation, and how are retailers adapting their returns strategy as a result? I spoke to Al Gerrie, co-founder of returns management platform Zigzag Global, veteran ecommerce professional David Williams, and Larisa Summers, SVP Marketing at returns platform Optoro about the trends they have observed, the importance of a good returns experience, and how they think retail and returns will be transformed in the long term.
How retailers are adapting their returns to the coronavirus era
One of the most immediate changes that many retailers have made to their returns policies is to extend the window in which goods can be returned – either to allow for more flexibility (and possible delivery delays), or to give customers the opportunity to return goods in-store once stores re-open.
As a result, overall return rates have actually been in decline: a joint report by Optoro and Returnly, published in May, noted a 20% decrease in average weekly returns processed by their returns management platform as consumers hold off on returning items until they can visit a store – though supply chain disruption and limits on labour are also likely to be factors.
But not all returns can wait, and consumers have been making use of the various options available to them to return items safely and without risking potential infection. Some of the methods being adopted by retailers include curb-side returns, in lieu of in-store returns; collection from customers homes; and returns lockers, so that customers can avoid coming into contact with drivers. Larisa Summers, SVP Marketing at Optoro, also observes that retailers are seeing an increase in mailed-in returns.
Al Gerrie, co-founder of Zigzag Global, reports that some retailers have also adopted a free returns policy for the first time in a bid to entice customers to shop with them – although others have taken the opposite approach, and begun charging for returns for the first time in order to offset costs. He also notes that increasing numbers of customers are buying items they know they will return:
“We’re seeing basket sizes increase because people are buying multiple sizes and multiple colours – I would say previously that was sitting at around a third of shoppers, whereas over the last few weeks, closer to half of shoppers have begun doing this,” says Gerrie. “That means they are buying with the intention of returning products – so they know they are going to return before they’ve even clicked ‘check out’.”
What this means, by extension, is that returns are becoming a de facto part of the online shopping experience for consumers – even more than they already were (and data indicates that a retailer’s returns policy plays a significant part in a customer’s decision to shop with, or return to, a retailer). I ask my interviewees how important returns are, in their opinion, to the overall ecommerce experience.
“It’s extremely significant,” Gerrie says immediately. “It’s a decision-making factor for the consumer as to who they shop with and whether they will even purchase in the first place. The returns experience is critical for that consumer – and never more so than now.”
“I think a good returns policy can make or break a retailer,” Williams agrees. “There’s enough detail out there to say that – along with delivery costs – it’s the second- or third-most-cited reason for customers not buying from a website. I understand why it’s always been a contentious point – especially if you have a lower-price product, it can be a real issue to your return on investment.
“But what gets missed, often, with returns is the extent to which it could be affecting your conversions in the first place. It can also engender customer loyalty: fast-track returns, and knowing that the money is going to be back into your account quickly, can engender loyalty in the long term.”
Compounding a crisis?
Many commentators were already referring to the state of retail returns as a ‘crisis’ – or at least as a serious and persistent problem – before Covid-19 brought about an unprecedented shift to online channels. Now that it has, is Covid-19 going to compound the issue of returns? Will it be a breaking point for retailers?
“If you’re a multichannel retailer, [the coronavirus crisis] is probably exposing whether you had a decent integrated process there in the first place,” says Williams. “It’s highlighting flaws in processes that need to be fixed.” He adds that an increasing frequency of returns from customers will definitely lead to issues with product and supply chain visibility for retail brands. “It’s the lack of knowing where your product is, and the cost associated with it.”
“With Covid-19 already straining supply chains, a poorly managed returns strategy can exacerbate capacity issues, hurt customer loyalty and contribute to excess inventory challenges,” agrees Optoro’s Larisa Summers. However, she is more positive about the opportunities that the situation could bring about. “These challenges may push retailers to modernize and innovate their returns strategies from the front- and back-end to lower costs and boost revenue.
“On the front end, retailers have an opportunity to improve the returns experience for consumers with self-serve online portals, expanded drop-off locations and contactless options. On the back end, we expect retailers to turn to tech-driven solutions to efficiently process returned items,” Summers says.
“As an ecommerce return surge could exacerbate excess inventory issues, this is also an opportunity for retailers to look at their recommerce strategies to make the most of inventory on hand. We’re seeing increased interest in our recommerce offerings which give retailers and brands access to our online wholesale and direct-to-consumer marketplaces, and can power their own outlet or discount channels.”
What is recommerce and why is it growing in popularity?
The lasting impact of Covid-19 on ecommerce and returns
Looking into the future, how do the experts I spoke to believe that our current situation will shape long-term changes in shopping behaviour, particularly around returns? All three of my interviewees are unanimous in agreeing that there will be a permanent change to the way that online shopping is carried out.
“This consumer behaviour has been going on long enough to create a more permanent shift,” says Al Gerrie, noting that this is particularly likely to be the case now that older consumers, who are more likely to abide by the rules of lockdown and be cautious about venturing outside, are becoming comfortable with online shopping for the first time. “We’ve definitely seen a spike in older customers buying from us – there’s a much larger proportion of older consumers who are naturally online now that wouldn’t have been before.”
Gerrie also believes that even as stores re-open, customers will be reluctant to venture back into changing rooms for hygiene reasons – making the shift towards trying clothes on at home (and often, returning them) permanent. “The bedroom is the new fitting-room. People will buy online more, shop at home more, and most likely, return from home more,” says Gerrie.
“I don’t think the whole country is suddenly going to stop using shops, but there are a number of people that will continue to shop online and be less likely to return to stores quickly. I also think that the role of the store will change as a result of Covid, and stores will need to re-invent themselves a bit to attract customers back.
“As for online, I think there will be a lift in consumer expectation and demand as people shop online more and have infinite choice online, which will make reputation more and more important.”
Larisa Summers predicts that the retail industry will likely be operating under a ‘new normal’ for the rest of this year and possibly into the next. “No one knows if or when we’ll ever get back to where we were before; it’s likely we’re looking for the “next normal”,” she says. “We expect consumers will continue relying on online shopping and expect more flexible return policies and experiences.” In its most recent post-Covid-19 survey, Optoro found that nearly a third of people were motivated to make a purchase due to a flexible return policy.
“In terms of returns strategies, we expect a contactless mode of returns to take off, assisted by scanning technology like QR codes,” Summers says. “When a buy online, return in store (BORIS) model is possible again, retailers will look for ways to streamline the returns process in-store and adopt features like return-specific checkout lanes that minimize contact between employees and consumers.”
“‘More digital, more ecommerce sales’ is going to be pretty permanent,” predicts David Williams. “I think it’s going to be really important to listen to customer services and find out what the customer would like and what they’re struggling with.
“Companies might need to start thinking differently about their returns models again – do they want to try a free returns model to acquire customers? There’s opportunities for returns providers as well, to help businesses get visibility over their stock and offer a better customer experience there.
“Retailers are going to want to reduce their returns even more – the sensible retailers will be looking at how they replicate the in-store browsing experience online. How do you make all of that product information available online?
“There’s going to be a lot of improvements on PDPs (product detail pages), potentially video information, more integrated customer service – maybe with store staff instead of customer service staff. Things like fit technology for clothing will also be more important. Retailers will need to be qualified in every bit of information that they give to a customer – because they’re not going to be able to ask anybody in the same way that they have done before, by popping into a store.
“I also think that sticking with traditional store-buying and merchandising methods will be difficult, because it’s hard to make those work online. Boohoo is doing well because it’s fast and agile – they buy shallow, sell fast, with none of the massive bulk-buying of stock that then has to be discounted at the end. Multichannel businesses will have to be more agile and think about how their stock turns are done – some of them are going to have to think more like pureplay if they want to survive.”
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