The Surprising ROI of Online Returns

By Jonathan Feldman on April 04, 2018

We can all agree that acquiring new customers is hard. After months of setting up your marketing campaign, re-targeting, personalization and optimizing your store website, it can be painful to see someone initiate a return.

But a return doesn't have to mean a lost sale or an unhappy customer.

Consider the returns experience in-store. The moment a customer decides to make a return is the moment you have the opportunity to save that sale. A shopper walks into your store to return something and does a good store owner say? “Oh no problem here’s your money back, BYE!” or do they say “I’m sorry it didn’t work out, we have a few other things you may like instead, do you mind if I show you?”

Maybe that interaction doesn't result in a new sale every time, but it does dramatically increase the odds while providing your customers with a pleasant brand experience.

So the question remains, how do you bring that in-store experience online? How can you save more of your online sales through product returns?

The Impact of Online Returns on Customer Lifetime Value

Before jumping into the 'How' let's have a look at the 'Why.' Why invest in the online returns experience at all? 

The Journal of Marketing Research set out to answer this question by conducting a study of 26,000 online shoppers across apparel, footwear, and accessories to understand the potential impact of online product returns.

What they found was that the level of risk an online shopper associated with the return experience had a profound impact on that shopper's future purchases. The segment of retailers who offered a low-risk returns experience, saw 45% higher profits per customer over a six month window and 29% higher profits per customer over a three-year span. Lowering the customer's perceived risk of current and future purchases made significant impacts on customer value in both the short-and long-term.

As Craig Adkins of Zappos put it, “Our best customers have the highest returns rates but, they are also the ones that spend the most money with us and are our most profitable customers.” 

Investing in Customer Retention

OK, so we know online returns have a big impact on repeat purchasing and repeat purchases are the lifeblood to a healthy business.

But did you know that the average e-commerce brand devotes 81% of its marketing budget to customer acquisition, and only 19% of its budget to customer retention? Or that 40% of the U.S. e-commerce retail revenue comes from repeat shoppers, but those shoppers only represent 8% of website visitors?

So while big investments are being made to drive new sales, don’t forget about the importance of retention. 

For the average e-commerce brand in the United States, it takes 5 new shoppers to equal the revenue of 1 repeat shopper. By investing in customer retention at every point of the shopper journey, including post-purchase, you can build a community of loyal shoppers that purchase time and time again. 

How to Save More Online Sales Through Product Returns

By making returns low-risk for your online customers, you, in turn, make it easier to buy and encourage repeat purchasing down the road. But how do you save those inevitable returns and convert them into repurchases today? 

The fact is, while eCommerce has been evolving over the past 20 years, the experience of returning products online hasn’t. To think we’re employing the same returns processes as we did before the iPhone was ever released seems a bit outdated.

To help brands modernize the returns experience and save more online sales, we're powering a new experience that fronts consumers a credit at the start of the return process, rather than at the end of it. 

Not only does this instantaneous credit give shoppers a clear, low-risk, path to buy again but it also presents an opportunity to surprise and delight your hard-earned customers with an unexpected experience impossible to forget.

By Jonathan Feldman

Jon Feldman leads Strategic Partnerships at Returnly, where he works to develop and grow the e-Commerce technology Ecosystem starting with the post-purchase experience.