Treat Returns as a Competitive Advantage that Increases Customer Lifetime Value

Ecommerce returns are the new reality for retailers, but their rapid rise doesn’t have to crush conversion rates and profitability. Instead, brands should put themselves in shoppers’ shoes. Consider how returns are central to the customer experience and can create a competitive advantage, differentiate a brand and increase customer lifetime value.

Turn Returns Upside Down

The popularity of online shopping has created enormous opportunities to reach new customers, but this has come at a cost. Along with fast, free delivery, shoppers expect seamless return options. On average, it costs $33, or 66%, of the price of a $50 item for retailers to process a return, up from 59% last year, Optoro estimates

It’s easy to see then why minimizing returns has become such a high priority, as online orders, which make up the bulk of returns, become a larger piece of all retail sales. Just last year, total returns accounted for $761 billion in lost sales for U.S. retailers, according to NRF. Exacerbating the situation, these same shops lost $10.30 to return fraud for every $100 in returned merchandise accepted, up from $8.80 in 2019.

Worst of all, for all the added costs retailers take on to fulfill returns, shoppers still are unhappy after going through a hassle-filled reverse logistics process.


Taking the Long View Toward Higher Customer Lifetime Value

Although brands should continue to develop best practices for reducing losses from returns, they should also examine the enormous upside of returns. Positive opportunities that returns provide include the chance to interact with profitable shoppers again, and providing a better experience that ultimately increases customer lifetime value. Overstock CEO Jonathan Johnson even made a fantastic point recently about creating an optimum customer experience to decrease the likelihood of returns from even occurring. 

Meaningful interactions are a priceless part of creating customers for life. This is why making returns as customer-friendly as every other point in the buying journey gives you a massive competitive advantage over rivals that stick with slow, convoluted processes.

Generally, nobody wins with returns, as retailers’ profitability tanks and customers still aren’t happy. Why? Consider the traditional returns process: Look up the merchant’s return policy, find the receipt, request return authorization, print a shipping label, repackage the item, drop it off at a carrier, wait days for confirmation that it was received, and finally, wait even longer to receive a refund minus a returns shipping fee.

All this work, extra money and added frustration for both businesses and customers that guts CLV and customer acquisition costs. But get the returns experience right and 92% of customers will buy again.

Balancing Costs with Customer Satisfaction and Loyalty

Retailers must stop viewing returns, and customer experience overall, as a cost center. Rather, view returns, customer experience and customer support teams as revenue and retention drivers.

Offering free returns is the first step in making returns a customer-centric experience that leads to higher CLV. When customers know they can get their money back easily, they’ll shop confidently with an unfamiliar merchant and spend more. Free returns alone aren’t enough, though.

Similar to how Amazon Prime has made fast, free shipping an expected part of ecommerce, customers seek return processes that are equally stress-free and easy to complete. A returns management process strategically designed to boost loyalty and retention includes the following:

Instant Refunds: Shoppers will no longer constantly log into their bank account to see if the refund has been processed, or worry that the return fell through the cracks. This reduces the burden on customer support, which frequently is asked, “Where’s my refund?” during the returns process.

Visibility into Return and Refund Status: Like shipments, customers want to track their return whenever and wherever they want. Further, retailers should proactively notify customers when returns have been received and refunds issued (if instant refunds aren’t possible).

Offer Both Digital and Human Customer Support: Streamlined return experiences lean heavily on automation, as most people don’t want to make a call in order to return something. The bulk of mundane and common customer inquiries can be offloaded to digital workers, while shoppers still have the option to talk with somebody if they prefer. This reduces customer support costs and frustration, along with making returns easier for customers.

Automated Exchange Process: Returns are an unavoidable part of ecommerce since customers can’t try items before purchasing. Keep more sales by making exchanges hassle free to complete. Instead of shoppers asking for their money back, let them exchange for another size in just one click.

Digital Shipping: People aged 50 and under rarely print at home (if they even own a printer), so these shoppers are especially frustrated when they’re required to print shipping labels. Instead, offer the ability to scan a code on their phone at the shipping location and drop off returns as-is. No repackaging requirements either.

Make Return Policy Highly Visible: Promote seamless free return policies, a.k.a. don’t bury them in the FAQ section of the websites. While merchants often think highlighting return policy encourages returns, the opposite is actually true. Shoppers feel more comfortable buying from new stores and appreciate the transparency, which builds trust and loyalty that increases conversions.

Looking Ahead

The data says it all — shoppers are more loyal and buy more from brands that provide free returns and a smooth return process. They’ll spend more per order and continue purchasing with the peace of mind of a guaranteed free, fast return in case goods don’t arrive as expected.

Customers want to shop with confidence and comfortability and will reward brands that make both the shopping and return processes seamless. Make it easy for customers to manage returns and they’ll buy more and refer more business.

Fang Cheng is the Founder and CEO of Linc, a conversational CX automation platform that is purpose-built for retail to resolve over 85% of customer inquiries without a hand-off to a human agent. Linc helps customer-centric retail brands create a competitive advantage through CX automation, reducing customer service costs and turning service interactions into opportunities for engagement and revenue growth. Linc’s clients include Carter’s, PacSun, Levi’s, Guess, Pampered Chef, Lamps Plus, Shiseido and many more. With a passion and relentlessness for improving the customer experience, Fang brought together a seasoned team of technologists and product-minded people to empower brands with the ability to serve and engage shoppers and to drive profitable growth in the face of rising competition and customer expectations. With a Ph.D. in bioinformatics from NYU, Fang previously co-founded a business acquired by Amazon, and prior to that she worked as a hedge fund manager.

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