The true cost of returns: It’s not just about the money
Your Shopify store is booming, and the orders are pouring in! You’ve worked hard to get to this point, and it’s a cause for celebration. It’s also a cause for making sure you have strategies in place for when returns happen.
As a Shopify merchant, it's essential to understand the actual cost of returns, which goes beyond the obvious expenses. According to the National Retail Federation, it was estimated that in 2020, eCommerce returns in the US amounted to a staggering $102 billion.
In this blog post, we’ll dive into the hidden costs of returns and serve you some strategies to help cut those costs. We’ll also reveal how order editing can be your secret weapon in the battle against returns. With return rates varying from 15% to 40%, depending on the industry, It’s high time to conquer the returns beast and protect your hard-earned profits.
The true cost of returns: It’s not just about the money
Don’t be fooled by the visible expenses when sizing up the cost of returns. The true cost of returns can be sneaky; that includes direct and indirect costs, along with some less obvious factors that can impact your bottom line.
Direct costs
Shipping costs
Brace yourself – studies suggest that it costs businesses an average of $10-$20 per returned item (source: Shopify). Ouch!
Refunds and replacements
Kiss your profits goodbye with every refund and replacement you send out. You lose the sale and potentially need to cover the cost of a new product.
Restocking and reprocessing fees
Returned items need some TLC (inspection, cleaning, repackaging) before they can be resold, adding more expenses to the process.
Indirect costs
Lost sales
A high return rate can scare away customers, leaving you with missed sales opportunities.
Brand reputation damage
One negative return experience can tarnish your brand's rep, making it harder to attract new customers.
Environmental impact
Let's not forget our planet – shipping returned items and reprocessing them leaves a carbon footprint that eco-conscious customers will consider when choosing where to shop.
Hidden factors
Administrative costs
Handling returns requires time and resources, including staff to process the return, manage inventory, and handle customer service inquiries.
Discounted resale
Depending on the product's condition upon return, you may need to sell it at a discount or even write it off entirely, leading to lost revenue.
Impact on customer lifetime value (CLV)
Frequent returns can deter customers from making future purchases, resulting in a lower CLV and lost revenue in the long run.
Considering all these costs, it's clear that returns can be a significant drain on your profits. But don't despair! It's time to tackle the returns monster head-on with strategies and a secret weapon – order editing.
Five strategies to reduce the cost of product returns
Ready to kick return costs to the curb? Here are some tried-and-true methods, backed by stats, to help you emerge victorious:
Improve product descriptions and images
Help your customers make better choices by providing detailed descriptions and eye-catching images that accurately represent your products. Research shows that 22% of returns occur because the product looks different in person (source: Econsultancy). Clear descriptions and high-quality images can close the gap between expectations and reality, reducing return rates.
Implement customer reviews and testimonials
Let your customers do the talking! Reviews can offer valuable insights and help others make informed decisions, reducing return rates. According to a study by Spiegel Research Center, displaying reviews can lead to a 270% increase in conversion rates and lower return rates, as customers feel more confident in their purchases.
Offer virtual fitting rooms and size guides
Give your customers the tools to find the perfect size and fit, minimizing returns due to sizing mishaps. A survey by BodyBlock AI found that 40% of consumers reported returning online purchases due to poor fit. Virtual fitting rooms and size guides can help shoppers nail the perfect fit and reduce returns in the process.
Provide clear and comprehensive return policies
Eliminate confusion with a well-defined return policy, and watch misunderstandings (and returns) drop. According to a UPS survey, 68% of online shoppers check a retailer's return policy before purchasing. A transparent and fair policy can boost customers' trust, leading to fewer returns and increased sales.
Enhance customer service quality
Be proactive and responsive to customer concerns, addressing potential issues before they lead to a return. A study by Zendesk found that 52% of customers said they would never do business with a company again after just one negative customer service experience. By offering stellar customer service, you can resolve issues promptly, reduce returns, and keep your customers coming back for more. A great customer experience can be achieved by proactively resolving order issues before product shipment. With the option to edit orders, customers can avoid the inconvenience of having to return items due to misordered quantities, such as ordering multiple products instead of just one.
The role of order editing in reducing return costs: your secret weapon
Order editing can be a game-changer in reducing return costs for Shopify merchants. With return rates hovering between 15% and 40%, it’s the perfect time to embrace this powerful tool. Here’s how order editing can help:
Allowing customers to edit their own orders
Empower Customers to Correct Errors: Let your customers fix their own mistakes, reducing the number of incorrect orders shipped. A study by Voxware found that 29% of returns are due to shipping the wrong item. You can minimize shipping errors and slash return rates by enabling customers to review and edit their orders.
Improve Customer Satisfaction: Give your customers control over their orders, and they'll be more likely to stick around for the long haul. According to a study by PwC, 73% of customers consider a positive experience an influential factor in their loyalty. Allowing customers to edit their orders can enhance their shopping experience, fostering loyalty and repeat purchases.
Customer Portal is a powerful tool you can use to incorporate this strategy. It’s available for free trial in the Cleverific Order Editor app on Shopify!
Enabling customer service teams to edit orders for customers
Assist customers with specific needs
Help customers with unique requirements get the right product, reducing the need for a return. A survey by Narvar found that 41% of customers want proactive communication about their order, and offering personalized assistance through order editing can address potential issues before they become returns.
Enhance the overall shopping experience
Smooth and personalized customer service can increase loyalty and retention. A report by Microsoft states that 96% of consumers consider customer service an essential factor in their choice of brand loyalty. Empowering your customer service team with order editing capabilities can improve the shopping experience, boosting customer satisfaction and loyalty.
Benefits of using order editing software
Reduce return rate and associated costs
Minimize incorrect orders and empower your team to make changes, slashing return rates and expenses. As mentioned earlier, Voxware's study found that 29% of returns are due to shipping the wrong item, which means reducing shipping errors through order editing can directly impact return costs.
Increase customer loyalty and retention
A seamless order editing experience can enhance customer satisfaction, increasing loyalty and repeat purchases. According to a study by Bain & Company, increasing customer retention rates by just 5% can boost profits by 25% to 95%, showcasing the importance of customer satisfaction in driving long-term success.
Streamline the order editing process
Save time and resources for customers and customer service teams alike. By automating and simplifying the order editing process, you can reduce the need for manual intervention, freeing up resources to focus on other aspects of your business.
Reducing the cost of returns is a crucial aspect of running a successful Shopify store. By understanding the actual costs associated with returns, implementing effective strategies to minimize them, and utilizing order editing software, merchants can improve their bottom line and create a better shopping experience. Investing in order editing solutions is not only a wise business decision, it can also help protect your brand's reputation and lead to long-term success in the competitive eCommerce landscape.
