A Frictionless Holiday Shopping Experience Is Still a Work in Progress
Flexible return policies can make or break a brand
The pandemic turbocharged online shopping during the 2020 holiday season. Online spending grew more than 32 percent in 2020, reaching a new record of nearly $189 billion, NBC News reports. The spike may be attributable to an online shopper tactic known as "bracketing," in which multiple variations of the same item are ordered so they can be viewed in person, with the shopper keeping the one they prefer. A growing trend even before the pandemic, bracketing only increased in prevalence as consumers became less willing and less able to shop in-store. But the surge had some collateral damage.
Last year's unprecedented online holiday shopping rush resulted in a shipping nightmare for carriers including USPS, FedEx, and UPS. The result was an estimated one million packages not making it to their destination by December 25.
For brand marketers, the volume of returned merchandise from the 2020 holiday shopping season was the final blow landed during a calendar year that had already left most feeling pummeled. According to a report released by Digital Commerce 360, retailers saw a 41 percent increase in returns of online orders compared to the previous year.
"Flexible return policies, such as wide return windows and free returns shipping, make or break purchases more than ever before," says Larisa Summers, CMO at Optoro, which helps retailers process, manage, and sell their returned and excess inventory. Indeed, according to an Optoro survey released last October, nearly 50 percent of consumers have decided not to make an online purchase due to the lack of free returns shipping.
Making Things Hassle-Free
Despite the logistical challenges posed by a high volume of returns, many brand managers see customers' willingness to return an unwanted item not as just another cost of doing business, but an opportunity to build relationships and learn more about their customers.
— Ryan Olivieri, director of marketing at Zappos
The data backs up this strategy. A 2019 research report from Optoro found that 97 percent of consumers are more likely to shop from a retailer with whom they had a positive returns experience.
Case in point: Zappos. The online shoe and apparel retailer helped to pioneer hassle-free e-commerce returns, and now that free and easy return shipping is to be expected among shoppers, Zappos continues to stay ahead of the curve.
"While free returns have certainly become more popular, we also pioneered the 365-day window for these returns, which is still an outlier," says Ryan Olivieri, director of marketing at Zappos.
He adds, "We have made it a priority for customers to be aware of our return policy and actually embrace it. Many companies see returns as a negative due to their costs. We actually see returns and the customers who engage with them as a positive aspect. It is an opportunity for us to build loyalty and trust with our customers."
The cost of processing returns — particularly for holiday items — can be staggering for many brands. While the numbers vary depending on the item, it is estimated that the average return costs around 59 percent of an item's original price, per the Adobe Analytics report.
"The problem is that a lot of holiday merchandise dramatically decreases in value after the holidays," says Lars Perner, Ph.D., assistant professor of clinical marketing at the University of Southern California's Marshall School of Business, who specializes in consumer behavior. "There's just not as much demand for these holiday items other times. So you risk being stuck with things that are slow sellers that you either have to discount very aggressively, or you have to keep in stock for quite some time."
Perner adds, "This is especially the case for online merchants … where they have to take things back in, they have to be shipped both ways. In some cases it can be quite costly."
This slimming of the profit margin on returned items has led some retail giants like Walmart and Amazon to forego the return process altogether, instead opting to refund unsatisfied customers while allowing them to keep certain unwanted products.
Says Optoro's Summers: "Occasionally, retailers will allow customers to keep a returned item up to a certain price point. These kinds of policies remove the obstacle of making a return, which can boost customer satisfaction and loyalty."
While these policies make for less hassle and more satisfaction among consumers, Summers notes that if the items are being thrown away — as opposed to donated or resold in the secondary marketplace — the negative effect on the environment is compounded. "It's not always the best solution," she says.
For smaller brands without the revenue to cushion the blows of returns, keep-and-refund policies might not make fiscal sense, either. Instead of the "just keep it" strategy, making returns as frictionless as possible — and being proactive about making sure that customers know the returns process will be truly hassle-free — seems to be the most salient marketing lesson from the 2020 holiday debacle.
"All of the most innovative examples of brands that encourage returns rely on making them frictionless," Olivieri says. "When customers are returning product, they certainly don't want to have additional tedious steps in this process, as that can build frustration and diminish loyalty."
When it comes to creating an effective returns experience, convenience and communication are key. Shoppers who described their last return as "very easy" said that it was because they were able to drop off the item at a convenient location (46 percent) and that they were informed when the refund was processed (43 percent), according to a survey conducted by fulfillment software vendor Narvar Inc. and released last September.
Nearly 40 percent of respondents said it was easy because they got an instant refund, and 32 percent said it was because they received an updated status of the return, according to the survey.
"The best returns messaging eliminates any red tape around the returns process and builds customer trust by not burdening customers with unnecessary steps or inconveniences," Olivieri says.
Promises, Promises
Along with avoiding consumer hassles, retailers should be careful not to make promises that they can't keep, particularly during the holiday season, when stress and emotions run higher than usual for many people.
How shipping delays affect customer relations likely depends on how long a customer has been in the fold, and whether brands overpromised and underdelivered.
"Historically, merchants have offered guaranteed [Christmas] delivery if an order is placed by December 22," Perner says. "If some merchants had been brazen about this [in 2020] and then hadn't been able to deliver, that would be a challenge. I would hope that most merchants this year have been responsible in not overpromising."
Brands and organizations may also need to assuage any hard feelings among consumers who believe they got stiffed during last year's holidays and are looking for a better experience this year. "People probably were understanding on an intellectual level," Perner says. "It might be another thing emotionally. There may still be some resentment and frustration."