What goes through your mind as you return a purchase? A quick search on Reddit will reveal hundreds of consumer discussions ranging from their anxieties of being prevented from purchasing from their favorite retailers to their lack of guilt over taking full advantage of the liberal return policies most retailers have adopted in recent years.
Most recently, there’s been a conversational spike around: “How many returns is too many?” Or, “Am I going to be banned for ‘abusing the return policy’?”
The rising fear among customers over being banned is to be expected. Retailers have begun to recognize that free and easy returns are causing significant damage to their bottom line. For example, Asos famously changed their return policy this year with a special caveat: “If we notice an unusual pattern of returns activity that doesn’t sit right…then we might have to deactivate the account and any associated accounts.”
And Asos is not alone. Amazon, Best Buy and Net-a-porter have all instituted similar policies. There are many significant costs that rise with product returns. For example, Statista estimates that return deliveries alone will cost $550 billion by 2020, and that doesn’t include the labor and disposition costs. It’s no surprise that retailers are starting to fight back against rising returns, with some retailers instituting an outright ban of customers who return what they deem to be excessive amounts.
Those customers are known as the dreaded “Serial Returners.”
Banning a serial returner impacts more than that individual customer. It diminishes the overall brand value and makes your customers angry — or worse, afraid to shop with you. The result is that customers become wary and unsure of how retailers define returns exploitative behavior. One typical comment on Yelp: “A consumer shouldn’t have to calculate their return behaviors in order to maintain their shopping freedom.”
We agree and believe that there are better alternatives to address Serial Returners than instituting draconian return policies that cut off those who exploit lax return policies from future purchases. The ability to identify who they are and why they return is an opportunity to learn and grow as a business. Analyzing their behavior is the first step to discouraging exploitative behavior without sacrificing customer experience and is an important component of overall returns reduction.
Remember the 80/20 Rule
Before we discuss the classification of Serial Returners, let’s first address your best customers based on Customer Lifetime Value. These are your customers that buy frequently, return frequently, but come back to buy even more. If 80 percent of your sales are due to 20 percent of your shoppers, there’s a good chance they’re making some significant returns just due to the sheer volume at which they purchase. According to a former Zappos executive, “our best customers have the highest return rates, but they are also the ones that spend the most money with us and are our most profitable customers.” These customers are also more likely to be advocates for your brand, spreading word-of-mouth and e-WOM.
The Four Serial Returner Personas
While Serial Returners are an easy scapegoat for high return rates, not all Serial Returners are fraudulent or profligate. We have identified four major categories of “Serial Returner Personas.” When you identify which category your returner falls under, then you can take meaningful action to reduce the amount or frequency at which they return.
Impulse purchases can be extremely lucrative for apparel retailers, particularly online. But when impulse turns into compulsion, things get risky. People with compulsive buying behavior often feel guilt and remorse after a shopping binge and return products to allay the guilt. These shoppers can be identified by their habit of frequently purchasing large quantities of items only to return one, if not all, of the products.
You probably know someone who has purchased an outfit to wear for a night out only to return it the next day. This common practice is a form of return fraud that occurs frequently for luxury products. It’s also seen in consumer electronics, for example, where shoppers will buy products for the Big Game only to return the next day.
Social Media Wardrobers
Driven by influencer-culture and social media, some shoppers are buying and wearing outfits #fortheinsta. In a day and age where everyone is expected to cultivate a personal brand, up to 10 percent of shoppers surveyed admit to buying clothes they’re planning to snap and send back. While #OOTD (“outfit of the day”) posts can provide some marketing, the cost of customers leveraging your store as a “free rental service” can swiftly outweigh the benefit, as Asos recognized.
Bracketing entails purchasing multiple versions of a style/item (different sizes, different colors, etc.) with the intent to return most of them, essentially turning their bedroom into a dressing room. Because e-commerce has made it so easy for shoppers to be indecisive without shouldering the financial burden, 40 percent of customers engage in some form of bracketing.
Product Returns Are an Opportunity to Create Positive Customer Experience
Once you stop painting your Serial Returners with a broad brush, you can take meaningful actions to improve the customer experience for the returner as well as your broader customer base. Knowing where on the spectrum your returner falls will enable you to make decisions on how to personalize the customer shopping journey, such as adjusting offerings or removing features that drive impulse purchases. You may even decide to customize the return journey as well, by deciding to gently rescind free return shipping privileges to those who are returning excessively.
For example, if you’ve identified a customer is a Compulsive Shopper/Returner, you may decide to remove them from marketing e-mails or remove “scarcity notifications” (“Only a couple left!”) from their online experience. If you realize that you’re a hot brand with Social Media Wardrobers, you could pilot a rental program and market it to this segment of customers. If you have high numbers of Bracketers, you may invest in fit analytics technology or use available customer buying and return data to guide size selection so that customers can feel more confident with their choices during the consideration phase. And for your model customers, reward and incentivize their good behavior.
With All these Serial Returners, How Do You Reduce Returns?
In order to reduce returns while dealing with a complex variety of consumer return behavior, it’s important to have a holistic approach to data mining and analytics. It’s rare that all returns relevant data is analyzed in a comprehensive fashion to identify the root cause of certain returns, but that is where you need to start. Once you can identify where your customers are on the spectrum of return behavior you can take action.
For example, are they exploiting a generous return policy, or have they been making purchase decisions with incomplete or faulty information? Another important area to support analysis is “customer listening,” particularly in the form of online reviews. Once you know why someone is returning, only then can you personalize the returns experience. While returns don’t have any impact on credit scoring, there are mechanisms being tested in the industry to score individuals and products based on their return factor.
Given how expensive returns have become for retailers, they are a critical missing piece of the Customer Lifetime Value equation. Ultimately, to mitigate the havoc that Serial Returners have wreaked on the industry, retailers will need to better understand who and why these customers are returning in such high quantity and frequency. Having data that provides a detailed and comprehensive view of a customer’s return behavior will reveal opportunities to alleviate the rising costs of sustaining them as customers.
Retailers are swimming in this raw data. It’s time to put it to work, because if you’re going to start “firing” your customers, it should be selective and used as a last resort.
Navjit Bhasin is founder and chief executive officer of Newmine, a retail commerce optimization and returns reduction company.
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