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Ask the Expert: How to Drive Cost Efficiency in E-Commerce Returns?

Nov 14, 2023

Returned products generate large costs for e-commerce businesses as well as the climate. In addition, returns are a major source of poor customer experience.

We sat down with Markus Nordlund, return management expert at Easycom, to learn what businesses can do to minimize this cost.

What Are the Largest Costs Associated with E-Commerce Returns?

In general, the cost of returns can be split into three main buckets:

  • Customer service: Handling questions and administration around returns is extremely time-consuming. Often, a staggering 25% of the tasks managed in a customer service team concerns e-commerce returns. Obviously, there are much better ways to leverage these resources. What if you could use that time to provide better service to customers or drive upsell activities?
  • Operations: Unfortunately, most e-commerce businesses handle all returned products in one standardized process, often including manual steps to register returns, control the quality of the product and update stock levels. But is it really worth spending the same time and resources controlling the return of a pair of socks vs. a high-end brand jacket? This kind of one-size-fits-all process can be very costly for e-commerce businesses in the long run.   
  • Unsold products: Every day and hour that products are in the return process the business is losing money by not being able to sell that product to another customer. If we’re talking about a seasonal product, such as fashion or interior design, you may even miss the opportunity to sell it during the right season and will be forced to put it on sale. With a high return rate that will hit your profitability badly.

Where Do E-Commerce Businesses Have the Most Potential for Savings?

There are a few quick win actions businesses can take to save costs on returns. It all starts with data.  You need data to help understand why returns occur in the first place. Gather feedback from customers, collect return codes and listen to your customer service reps. Then analyze the data to identify the top returned products. This is where you should start improving product information and communication on your site. Maybe you need to add more detailed information about size, color or material to help customers make the right choice in the first place.

If you operate an omni-channel business, you should also look at providing the option to return online purchases in one of your stores. This is not only more cost-efficient for you, but also a better option from a sustainability perspective.

On a longer term, businesses who are looking to streamline costs should consider digitizing the entire return management process. By directing customers to register their returns on your site you’ll be in a better position to interact with the customer and drive the process forward in the most favorable way for you and the customer. Plus, you’ll release a lot of pressure from your customer services team. With all communication happening on the site, you have an opportunity to educate the customer about your return policy, provide personalized communication and collect more data about your customers’ return behavior. Data that’ll help you target marketing campaigns to the right audiences and identify segments where a return fee may be suitable. In short, with a digitized return process you’ll gain insights that’ll have a direct impact on your sales and marketing efforts enabling more profitable and sustainable sales long term.

Can E-Commerce Returns Be Both Cost Efficient and Sustainable?

From a sustainability perspective you want your products to be used, not transported back and forth, nor stored on a shelf in a warehouse or in the customer’s wardrobe. Shortening lead times for getting a returned product back on the shelf is not only a way to sell the product with existing margins during a seasonal sales period. It also helps putting the product in use. In that perspective, a return may be the first step of a circular process.

Here, you can work on ways to ensure the product gets to the right place directly from the customer’s return. A damaged product may go to a recycling site whereas a discounted product can be shipped directly to your outlet store without a stop-by at the warehouse. This way you can establish a return logistics strategy where the probability to sell your product at full price increase in combination with reducing the transportation footprint throughout the product’s lifecycle.

The sustainability responsibility for products will likely be more regulated in future meaning you as a seller of a product may be responsible for restoring and recycling products that are not used. It’s important to look at ways to extend a product’s lifetime by leveraging different kinds of circular business models. An efficient, digitized return management process is a good first step.