When you’re thinking about conversion rate optimization, returns probably aren’t the first thing to pop into your mind.
But they should be!
Returns are an essential component of your online business. Whether you like it or not, your return policy directly impacts sales:
An inconvenient return policy deters 80% of shoppers.
The rise of ecommerce has made returns more common than ever. While the brick-and-mortar return rate hovers around 9%, the average ecommerce return rate is more than double that at 20%. During the holidays, returns surge up to 30%, or even as high as 50%, depending on the industry!
The cost of returns can really add up - in the United States alone, returns cost merchants a total of $260 billion in 2016!
Truth is, the cost of a bad return policy can be substantial. As a merchant, one of your key challenges is to find the balance between offering a customer-friendly return policy and limiting your exposure to handling costs from a profitability perspective.
But wait! What’s causing all of these returns?
Since shoppers don’t have the luxury of trying on items or seeing them in person prior to purchasing, they buy blindly knowing a liberal return policy will save them.
Here are some of the most common reasons consumers might return a product:
- Size: Merchants in the apparel industry feel the most pain here: up to 40% of shoppers send back an item simply because it wasn’t the right size.
- Damages and Defects: Up to 20% of returns are due to damaged goods. And even if the items are in tip-top shape, customers may not be impressed with the quality of the product once it arrives at their doorstep.
- Product Images: Photography plays a huge role in the conversion process and images can be misleading if done poorly. According to this study, 22% of returns are due to an item appearing differently in person than it does in a picture.
- Mis-shipments: Mistakes happen, and at a high cost to merchants: an alarming 23% of customers are shipped the wrong item.
Furthermore, returns may be amplified by the rise of mobile buying. Poor mobile user experience makes it more difficult to see product photos and descriptions in detail.
What needs to be included in a Return Policy?
A return policy is a fine balancing act: it needs to be lenient enough to encourage visitors to buy, but it needs enough limitations so customers won’t take advantage of it.
No matter what, you’ll want a policy that’s transparent and flexible: customers hate hidden fees and will abandon their purchase if they find them.
Remember, for online shoppers a return policy is also their insurance policy. A good policy encourages conversions while also fostering customer loyalty: 92% of customers are more likely to buy from the store again if returns are easy.
If you’re struggling to determine the best policy for your business, a good place to start is with Shopify’s handy return policy template and then adjust it to fit your needs.
Not sure what those needs are yet? Read on, because we are about to show you what makes a good return policy great.
Take a peek at your competitors
Approach your return policy the same way you would approach any promotional offer: look at what your competitors are doing.
Do they offer full refunds or store credit? Do they offer free return shipping? How many days do customers have to return a purchase? If your competitors offer lenient return policies, chances are a strict policy on your end will hurt your business.
SPOTLIGHT: Luxy Hair
Luxy Hair dedicates an entire page to their return policy, and go into extreme detail. They've created an FAQ section so customers know exactly what to expect if they need to return a product.
Offer Free Returns
Remember, customers love the word free.
Store owners are listening: around half of stores now offer free return shipping.
Studies show that 66% of online shoppers will review a store’s returns and refunds policy before deciding on a purchase. Of that number, 81% will only go ahead with the purchase if the store offers free returns.
Although you might cringe at the thought of adding another cost to your business, think about the benefits:
A $10 return shipping cost to you might make the difference between a one-time purchaser and a lifetime customer.
The value of a lifetime customer is worth much more than a $10 shipping cost!
It pays to be flexible
Strict return policies have been shown to harm net sales, rather than encourage them. Stores with a strict policy show almost a 9 per cent reduction in sales compared to stores with more lenient return policies!
Customer-friendly return policies encourage store conversions, especially at higher price points: 27% of shoppers would purchase an item that costs more than $1,000 if it offered free returns, compared to the 10% who would purchase if it didn’t.
Knowing that every skin type is unique, Cocokind offers a flexible return policy giving full refunds within 30 days of delivery. They also use returns as an opportunity for feedback and ask customers to let them know how they can improve their products!
Provide great customer service
A customer-friendly return policy is part of great customer service. If you make returns easy, you’re likely to benefit from it.
Customers appreciate amazing customer service, and they are more likely to leave a review when they’ve had an awesome experience with your store. Plus, as we mentioned earlier, 92% of customers are likely to buy from the store again if returns are easy!
Play the Automation Game
There’s no getting around it: returns drain resources.
One of the best ways to handle returns is with automation. It helps free up your valuable time, so you can focus on other areas of your business.
Here are a few ways to automate returns:
- Make it easy for customers to request a refund without contacting customer support.
- Send emails to your customers with status updates: when an item is received, when a refund has been issued, or when a new item has been shipped (bonus points if you give them a tracking number!).
These can easily be done with the help of an app. For merchants on Shopify, a leading app in this space is Return Magic (recently acquired by Shopify). This app has a lot of useful features, including multiple refund methods, advanced reporting and automation for return labels and emails.
SPOTLIGHT: Velour Lashes
Velour Lashes communicates their return policy at every step of the shopping journey. Their choice of words, “The Velour Promise” evokes emotion and fosters a sense of trust for customers.
Once visitors reach the checkout page, the policy is clearly stated right above the order summary.
Returns can start as a negative customer experience, but you can use returns as an opportunity to encourage them to shop with you again!
Try sending an automated email 72 hours after a return; express your apologies and offer them a discount on another purchase. This is a nice touch that shows you care, while also encouraging them to buy again.
Just because they didn’t like one item doesn’t mean they won’t buy another!
It needs to be easy to find
Your store’s return policy must be easy to find so visitors are aware of their options. Reinforcing the message throughout the shopping journey gives a peace of mind to customers.
Here are a few ways to communicate your policy:
- Add your policy to the header/ footer of your website.
- Clearly outline your policy at the time of checkout.
- If your offer is amazing (Free Shipping & Returns!), promote it with a banner.
- Consider placing next to the add-to-cart button, and/or the checkout button.
Don’t skimp on the details
Now that you’ve tackled what to place in your return policy, you’ll need to write it all down!
Two words of advice when it comes to this phase: details matter.
Be as concise and clear as you can: use plain language, call attention to any important dates and be sure to include any special requirements (e.g. proof of purchase).
But wait… don’t forget about the holidays!
Holiday shopping now starts as early as November 1, and you’ll need to reassess your return policy to account for gifts.
Keep in mind more than a third of consumers who first shop on an ecommerce site during the holidays will make a repeat purchase within the same season, so converting those visitors is important! A temporary holiday return policy adjustment (such as an extended return window) will help reduce frustration and provide the assurance a shopper needs to make the purchase.
January is peak season for returns, but your holiday return strategy needs to start as soon as your holiday shopping promotions begin (typically by November 1).
Here are a few ways to prepare your policy for the holidays:
Extend your return deadline, so customers have enough time after Christmas to return gifts. Consider setting a standard date, like January 31st (at the earliest), so customers have time after Christmas to return items.
Make your policy specific to purchases made within a given timeframe, such as Nov. 1 to Dec. 25.
- Consider offering instant refunds, store credit or automated real-time exchanges to retain that customer’s business.
It’s also important to inform your customer service lead of any policy changes, so that they’re prepared to answer customers’ questions and are also ready to monitor it for abuse!
Don’t forget to monitor metrics
Finally, make sure that you monitor your data to gauge how the updated return policy is impacting your business.
Below are a few key metrics to look at:
- Conversion Rate
- Return Rate
- Average Cart Size
- Customer Service contacts
- Qualitative customer feedback
It’ll take some testing to see what works, and what doesn’t. But keep an eye on the numbers, and it’ll help inform future policy adjustments.
As you can see, your return policy shouldn’t be overlooked. It really is an important aspect of your business that can help increase your conversion rate and build customer loyalty - especially when you think in terms of lifetime customer value. If you make the return process easy, friendly and fun, you’ll make more sales in the long-run!