Hunting for gold: Retailers’ return tactic wish lists

Last month on BOXpoll, we delved into how the proliferation of point solutions in ecommerce logistics is creating decision-making gridlock for retailers. This month, we’re looking closely at some of those point solutions – specifically, returns features. More specifically, the features retailers say are the most important, but are the least implemented. (AKA, wish lists.)

We presented 168 U.S. online retailers with a list of returns tactics and asked them (1) to rank the options in order of importance and (2) whether their business had adopted each feature.

We used the responses to put features into four buckets:

• Commodities (low importance, but widely adopted)
• Table stakes (highly important and widely adopted)
• Distractions (low importance and low adoption)
• Gold mines (highly important but not widely adopted, and our focus this month)

Among all online retailers, the top three “gold mine” returns tactics are:

• Advanced return analytics
• Lowering returns processing costs
• Large network of drop-off locations

What do they have in common?

Retailers of all sizes called a large network of drop-off locations highly important, but with relatively low adoption rates compared to other features we asked about.

The U.S. Postal Service has the most drop-off locations of any carrier in the U.S., with more than 30K post offices (and almost 140K blue collection boxes that can accommodate smaller parcels and creatively stuffed mid-size parcels. For legal reasons, that’s a joke.)

Beyond having the largest network, the post office is also the consumers’ favorite drop-off point. In December, BOXpoll respondents ranked the post office their most preferred return drop-off location for the second year in a row.

Because we know ecommerce needs vary by business size and type, we also segmented responses by annual order volume.

Mid-market ecommerce brands

For mid-market retailers (which, for the purposes of this survey, we defined as brands with annual DTC ecommerce orders between 25K – 250K), the top three “gold mine” returns tactics are:

• Advanced return analytics
• Online exchanges
• Large network of drop-off locations

For smaller and mid-size retailers, every customer (and every transaction) is precious. We weren’t surprised to see return analytics and online exchanges on this list.

Advanced return analytics help retailers identify key return reasons to improve products and reduce return rates. While highly valuable to mid-market retailers, we suspect cost is holding back smaller and mid-size brands from implementing them.

Online returns are brutal on margins, costing an average of 21% of order value. Brands typically charge consumers for shipping once in a buy/return cycle, resulting in the retailer eating the cost of the other shipping transaction while offering no guarantee of future purchase. Ouch.

Exchanges, on the other hand, allow retailers to deliver customer satisfaction while ensuring a purchase. But of course, it’s not that easy. Online exchanges are logistically complex to implement and risky to get wrong, with consumers calling poorly executed exchanges more annoying than no exchange option at all. Thus, the high importance/low adoption rating.

Enterprise ecommerce brands

For enterprise retailers (brands with annual DTC ecommerce order volumes of more than 250K), the top three “gold mine” returns tactics are:

• Large network of drop-off locations
• Lower processing cost of returns
• Lower transportation cost of returns  
   

Enterprise retailers are most focused on cost than anything else. Because they enjoy the lion’s share of order volume, small reductions in returns processing and transportation costs can have large impacts on their bottom line.

These brands—which are most often omnichannel retailers— are less concerned about online exchanges than mid-market brands because they prefer to drive traffic to their stores and handle exchanges there. Zara, for example, is dropping the carrot-only approach and introducing a stick in some markets, charging customers to mail back online returns but keeping in-store ecommerce returns free. We wouldn’t be surprised to see other enterprise brands follow suit in an effort to minimize lost value on returns.