How to Reduce Your Return Rate
There are a lot of things that can hurt your ecommerce site, but returns might be the most lethal.
Ecommerce returns destroy profit margins and put you in a hole that could ultimately sink your business.
But you can fight back.
What is an ecommerce return rate?
To calculate your return rate, simply divide the number of items returned by the number that have been sold.
So, say you sold 200 items in a month, and 30 of them were returned, your ecommerce return rate would be 15%.
30/200 = 0.15
The other way to figure out your return rate is to do it by the value of the items you sell.
If you sold $10,000 worth of merchandise last month, but $2,000 of it came back, that’s a cash return rate of 20%. If that rate persists, at the end of the year, you’re losing 20 cents on every dollar you think you’re making.
The advantage to figuring out your return rate this way is that you get a much clearer idea as to how ecommerce returns are impacting your bottom line.
But no matter which way you choose to calculate your return rate, you should always be doing all you can to reduce it.
What are the costs of ecommerce returns?
Returns stink. They’re enough to ruin your day/month/fiscal year.
Let’s go through the actual costs associated with ecommerce returns.
- The cost of the refund
- You think you’ve made a sale, and have accounted for the revenue, only to see the item come back to you and the cash disappear from your account.
- The cost of the shipping
- This one stings. Not only has someone decided they don’t want the product after all, but now you’ve got to foot the bill to take it back. Insult to injury.
- The cost of wasted time
- Time is money, and wasted time is wasted money.
- The cost of product disposition
- Then there’s the issue of determining what to do with those products that come back: once it’s back in your hands, it must be inspected and placed within one of several categories, ranging from resale to liquidation to actual disposal. When returned products are liquidated, they are sold for much less than their original value; when they’re disposed of, you get nothing.
- The cost of inventory management
- Restocking can come with many headaches, especially if you use drop shipping and need to pay a processor chargeback fee.
As you can see, it’s not just the lost sale that hurts—ecommerce returns are a many-headed hydra, with the costs associated spreading far and wide.
Make sure your products are accurately represented
Humans are a visual bunch. What’s that stat? People remember 80% of what they see and only 20% of what they read.
Men and women from every age group learn best through images. It’s the same thing when they’re buying online.
Product shots are make-or-break. Weebly agrees. According to a survey conducted by the web hosting company of online shoppers aged 16 to 55, “Over 75% of ecommerce shoppers say product pictures are very influential when they’re deciding whether they want to buy a product online.”
That’s one reason to invest in product photography, but the real one, the one that’s more germane to our discussion today, is this:
22% of ecommerce returns are because an “item looks different than the photos”
That is a considerable chunk.
To obliterate that number, try these tips.
- Don’t overedit your product images
- Retouch your pictures, by all means, but don’t make them impossibly perfect. You might increase conversions, but you’ll also increase returns by letting your customers down when they open their package.
- Pick the right angle
- Sure, an orange might look the same no matter how you shoot it, but you’re not selling oranges, are you? Pick the angles that communicate the most about your product.
- Take close-ups
- You know that cute feature when you roll over a product image and the little circle zooms in? People like that. When they can see the details of your product, they’re less likely to be surprised when it shows up on their doorstep.
- Don’t forget in-context photos
- Give your customer more ideas how your product can fit into their lives and you’ll be giving them more reasons to keep it.
Weebly sums it up perfectly: “Accurately representing your product will save you both time and money by helping you avoid having unhappy customers.”
Detailed product descriptions aren’t just for SEO
No, no, they’re for improved ecommerce return rates too.
The logic here is frighteningly similar to that behind shooting accurate product shots: give your customers specific and detailed information about the product and they’ll be less likely to return it.
If a shopper has all the facts, they’ll have no reason to send the item back, and send your true conversion rate into the gutter while they’re at it.
We all know that good product descriptions help with SEO—and that right there is enough of a reason to employ them. But beyond Google’s crawls, remember that there are actual people looking for actual answers. Help them, and help yourself in the process.
Like we explained in Why Does Website Personalization Matter?, when you give people what they want, they’ll thank you with their wallets. Everyone can be a winner.
Ecommerce runs on reviews
Product descriptions are the first thing your online customers will look to for answers to their questions.
The second? Reviews.
- Reviews impact 68% of online purchases
- 84% of people trust reviews as much as they do a personal recommendation
Social proof is hugely important when it comes to both increasing conversions and decreasing returns. “Numerous studies over the past five years have found that more than 80% of online consumers begin their shopping journey by doing research.”
If you don’t include reviews, your customers will use that as a reason to send back an item that isn’t up to their standards. If you do include reviews, psychologically they’ll be more inclined to hold onto it.
Lengthen the return window
Seems a little counter-intuitive, right? How could giving customers more opportunity to return your product result in fewer products being returned?
The first is that if your ecommerce return window is tiny, then customers will jump on it and make sure they can get the product back to you, regardless of whether they’re absolutely positive they want to. It’s a self-preservation thing, because they know they can always buy the product again in the future.
If the return window is a year long, then the customer feels no urgency. They might say, “Okay, I’m not sure if this product is completely right for me, but I’ve got time. I’ll wait a little bit and see.”
The second reason is something called the endowment effect.
This is a theory that claims that when people have actual possession of something, they assign a greater value to it than they would the exact same item that’s not theirs. It’s about loss aversion.
People don’t want to give up something they have ownership over.
So let your customers hold onto your product for a while longer—you’ll be surprised at how it reduces your return rate.
Chat reduces return rates
Imagine being able to interact with your customers at the exact point of purchase.
Imagine being able to answer any and all questions, assuage any concerns they might have, and prove that the item they’re about to buy is, without a doubt, the right one for them.
Imagine what that would do to your ecommerce return rate.
Now, live chat is nice, but it’s simply not scalable. For one, it’s expensive. For two, there’s no way to guarantee that your employees won’t make a mistake, either by asking the wrong questions or by forgetting your product catalogue and recommending something that’s not a perfect fit.
Live chat is not sustainable. AI chat is.
AI chatbots learn your brand voice and mimic how a perfect employee would talk to your customers. They also memorize your entire catalogue, becoming experts on all your SKUs.
The rest—taking what they learn from chatting with your customers and being able to recommend a product that won’t be returned—is simple.
Ecommerce returns don’t need to be your Achilles
It’s been established that ecommerce returns stink. It goes to reason, then, that if you can reduce your return rate, your business will be in a better place.
Help your ecommerce business by following what we’ve laid out here:
- Make sure your product images tell the whole (and the real) story
- Provide highly detailed product descriptions
- Solicit reviews and include them on your site
- Lengthen the return window
- Use AI chat to make sure they buy the perfect product in the first place
Or better yet, get in touch with us to see how we can help you reduce your return rate.