Increase Conversions with a Future-Focused Returns Strategy

This post was contributed by ShipStation partner, Signifyd .

The first quarter of the year brings about a helping of harsh reality for ecommerce retailers coming off of the high of the holiday shopping season and its torrent of incoming orders.

While Q4 is the best season in terms of order volume and conversions for many merchants, the first three months of the year can be a different story. Think of them as the “unconversion season” — the season during which holiday gifts that missed the mark come flooding back as returns. 

Returns have always been a thing — and they’ve historically run higher for ecommerce sales than for brick-and-mortar purchases. In fact, UPS expects to handle 70 million holiday season returns by the end of January, up 5 million from last year, Supply Chain Dive recently reported. 

Beyond the cost and inconvenience for merchants, the growing returns trend comes with a dark side. Consumers returned more than one in six online purchases in 2022, according to the National Retail Federation. And more than 10% of those were fraudulent, the NRF says. 

Ecommerce returns can no longer be written off as the cost of doing business. The COVID pandemic accelerated the ongoing shift to shopping online. As ecommerce becomes a bigger portion of retail, ecommerce returns become a bigger problem for online merchants. Between 2019 and 2021, the value of online returns grew 10 times, according to annual reports by NRF, before reaching $218 billion in 2022, a slight increase over 2021.

There are a number of reasons for the steady increase in online returns, beginning with the acceleration of the shift to online shopping during the COVID-19 pandemic. Add to that the fact that protection against traditional online credit card fraud has steadily improved through the application of big data and learning machines. Squeezing that revenue stream for criminal fraud rings has them looking for new vulnerabilities in the buying journey. NRF noted, for instance, that one in five retailers “attributed return fraud to organized retail crime.”

Everyday consumers, too, seem more prone to behaving dishonestly when it comes to attempting to keep a product they ordered while also receiving a refund. When Signifyd surveyed consumers in mid-2022, nearly a quarter of respondents (24%) said they had returned an empty box to a merchant or a box containing something other than the product they originally purchased in hopes of getting a refund while keeping their purchase. 

But while returns come with increasing challenges, they also offer retailers an opportunity. In Signifyd’s survey, conducted by market researcher OnePoll, 62% said they would buy more from a brand based on having a good return experience with that brand. And so retailers would be wise to pay careful attention to their return policies and practices. But pay careful attention, how?

The first line of defense against returns is avoiding them altogether: 

• Make sure your product descriptions and photos are accurate to avoid disappointing customers who buy expecting one thing, only to have something else arrive at their door.
• Make liberal use of sizing charts for apparel and how-two resources, including videos, for other products. That way the clothing fits and consumers don’t become frustrated with other products that they don’t understand how to use properly.
• Provide clear owners manuals and live product support to answer questions about products that might not be easy to use properly without some guidance. 
• Pay attention to repeated complaints or reasons for returns. Is there something in the product itself that needs adjusting or a redesign? Is there additional information you could add to product descriptions or support documents that would address a commonly cited problem?

Sometimes a merchant simply cannot avoid having an order come back. In those cases, it’s best to have given some serious thought as to how to provide returns that delight customers while not putting your business at risk of being taken advantage of. 

Signifyd’s survey found that 65% of consumers are likely to do less business with a brand that has provided them with a bad return experience. That means merchants need to determine the risk involved in each return and proceed accordingly.

For instance, in the case of a high-risk customer, a merchant might want to offer a store credit only after the product has been returned and inspected. But when a high-value customer with no history of abusive returns wants to send a product back, a merchant might want to provide an instant credit as soon as the package is scanned by the carrier that will ship the goods back. 

Getting the balance right requires understanding the identity and intent behind each return request. Merchants might sort that out by keeping their own data on returns, though that can be tricky if you’re a merchant that sells items that are not purchased frequently. Gaining meaningful insights might take years in that case.

Or merchants could seek to organize a consortium of retailers who agree to share return data in order to avoid return abuse. A larger pool of retailers would increase the chance that the consumer behind a return request had previously returned an item to one of the consortium’s other retailers. That would provide helpful insight into whether the request was likely legitimate or abusive. 

Alternatively, a merchant could turn to an existing network. Signifyd, for instance, relies on a Commerce Network of thousands of merchants producing transaction intelligence that understands the identity and intent of each transaction. Its Decision Center can automate the review of returns and automatically issue the response a merchant prefers based on the risk profile of the return request. That allows a merchant to grow the customer lifetime value of its best customers while protecting the enterprise from those who would take advantage. 

The one thing that is certain in the murky world of online returns is that they are going to continue to grow in number and importance. As consumers shift to more online buying, providing an excellent return experience will be a must for brands looking to grow and prosper. 

Forward-focused merchants, then, will find ways to limit the damage of the unconversion season. And as a result, they will be better off all year round.