And although retailers bear the cost of returns, the resulting customer loyalty and purchasing decisions are worth it, the authors note, citing a recent survey in which 88 percent of online retailers said they could process a return for less than US$15. “The increased purchase frequency and willingness to buy higher priced (and, potentially, higher margin) products could more than offset this cost of returns processing,” the authors say.
Because the analysis showed that the speed of credit issuance is important to customers, even simply informing them that their refund has been approved could make a difference. When a third party is involved, companies can’t control how quickly customers get their money back — various credit and debit card companies, and other financial services such as PayPal, take different amounts of time — but telling shoppers that a refund is on the way may be reassuring.
Typically, the authors write, operations managers would prefer to handle the fewest returns possible, and sales executives would rather keep customer purchases on the books. But actively encouraging returns could attract customers who have been uncertain about online retail or hesitant to try new products, the authors argue.
Investments in this area “should be rewarded in the marketplace with more loyal customers who purchase more, and with greater frequency,” they conclude.
Handling online returns proactively and effectively can increase customers’ repeat purchases and the amount they spend. Rather than being seen as the bane of operations and logistics managers, Internet returns should be viewed as an important opportunity to engage with customers and add to the bottom line.