How to Turn Retail Returns Into Revenue with Omnichannel
Posted by Amanda McLaughlin on Jan 31, 2023
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According to the National Retail Federation (NRF), the amount of retail returns between 2020 and 2021 jumped 178% in the U.S., rising from a staggering $421 billion to a mind-bending $761 billion. For some fashion retailers specifically, returns have hit nearly 40% of all sales.
To some, that might look like 40% worth of lost revenue. We see it as a chance to make money and boost customer satisfaction. Case in point – 44% of retailers report that customers that return items often have a greater lifetime value (LTV) than those who don’t return as frequently.
Easy and seamless return processes are fundamental to creating shopping experiences that entice customers to spend with you. The key to turning retail returns into revenue? Omnichannel.
Below we outline what makes returns challenging, how omnichannel returns can drive profit, and how to make them work to delight your customers and bottom line.
Customers return items for all sorts of reasons – and it’s not always because they want their money back. It could be the wrong size, the wrong fit, or not the correct style.
Retailers can accept these returns – whatever the reason and regardless of whether its for an online purchase or physical one – in their brick-and-mortar stores. Or customers can send an order to a warehouse or distribution center.
For most retail brands, both scenarios yield several sets of challenges. Often, these challenges arise from difficulty defining who owns returns, understanding why returns happen, and making those returned items available for resale.
The overarching problem with returns is connectivity. Many retail brands still struggle with inflexible legacy systems that can’t keep up with modern consumer journeys. Without robust and connected systems, return information becomes cluttered and unusable.
Not only does every touchpoint affect your customers’ experience, but it also affects your bottom line. Returns are made easy by connecting your return data, real-time and planned inventory, and having visibility over all of it. And omnichannel is the linchpin.
As powerful as they are, omnichannel returns don’t just pop into existence. To enable these effortless returns and ultimately make returns profitable, focus on the three following systems.
Effective return processes demand that you can see the entire order lifecycle – whether it starts online or offline. You must be able to access and connect customer, order, and inventory information across all channels.
An omnichannel order management system is crucial, as it gives you a system that can gather, sort, store, and organize purchase data for every customer. It also lets you see and interpret that data at will.
Insight is the greatest boon an omnichannel order management system (OMS) can give retailers. It orchestrates all orders across your enterprise while providing relevant information and real-time intelligence, which empowers your teams to deliver superior experiences across all touchpoints.
First up, your store systems. A mobile point of sale (POS) is essential in modern retail to empower and arm your staff with the means to meet customer expectations. According to a recent NewStore survey of nearly 600 U.S. consumers, 54% of consumers expect store associates to be equipped with a mobile device. Associates must have a way to swiftly verify who bought the item, where they bought it, how they bought it, and where inventory is.
Time to put that omnichannel OMS to work. An OMS integrated with a mobile POS gives associates a single source of truth for customer orders, all in the palm of their hand. This means they can accept returns swiftly and confidently (and sneak in a little upselling and cross-selling, too!)
To make the return process even easier in store, you may also consider creating a dedicated returns area. While checkout lines are fast becoming a thing of the past thanks to mobile POS solutions, a dedicated returns area eradicates any chance of queues forming and gives a slick feel to the returns process that customers appreciate.
A store inventory system that enables the buy/return workflow is what underscores the omnichannel returns experience. Most importantly, you must be able to integrate and share data with every solution in your tech stack, creating a holistic inventory view across your company.
Part of making returns profitable rests on how you handle the returned items after you have them back. Do they go back into your store inventory, to a landfill, or get lost in the backroom for eternity?
This is omnichannel inventory visibility in action. A crucial capability that gives you and your associates real-time visibility across all your locations, including warehouses, 3PLs, stores, and pop-ups. All accessible via phone, without having to call stores.
There are several ways to tackle inventory management in your store to improve your returns workflow:
A holistic inventory view across your company lets you capture the return and add it back into your inventory to resell in-store (at a profit). If the returned product is an online exclusive, leverage ship-from-store to place it back in stock and prepare it for purchase.
Transforming returns into profit takes a mindset shift. Instead of viewing returns as a revenue drain, brands should assess how to transform a return scenario into a selling opportunity.
How people shop has changed. As consumers buy more often online, they’re returning items more often, too – 20-30% of items purchased online are returned (compared to 9% bought in-store). How people return has changed, as well. Our research shows that 51% of customers expect to be able to return items purchased online without a receipt in-store.
Data like this confirms what retailers have long suspected: omnichannel returns are necessary for retailers. At least for those who care about delighting customers and boosting profits.
Going full tilt into omnichannel returns hits that magic spot between delighting customers and loosening their purse strings. Offer your customers a flexible return policy that’s both accommodating and enjoyable, and they will shop with you over and over. In fact, 92% of consumers are more likely to buy again from retailers that offer an outstanding return process.
Buttery smooth return experiences are vital and will be rewarded by your loyal customers. Manage your returns well, and you could drive a 22-46% increase in profit per customer on average over six months – and as much as a 29% increase over three years.
Where returns happen matters, too. Customers have returned to pre-pandemic shopping behaviors with gusto, and stores are back in vogue. However, they’re no longer just a place to purchase, with 62% of customers more likely to buy from a brand online, if they can return in-store.
As mentioned above, omnichannel’s key strength is connectivity. It lets you thread together all aspects of your business – ecommerce, physical stores, and mobile shopping apps – and marry them with everything you know about your customers. Like purchase history, style preferences, birthdays, anniversaries. Almost anything you can collect related to your buyers.
This level of connectivity opens a wealth of possibility when it comes to the return experience. The most powerful of which happens in the nexus of your brand – your physical stores.
Over half of consumers prefer to make a return in-store – a blessing for retailers seeking to generate additional profit. First, it is simply easier to sell to existing customers in-store. You have a 60-70% probability of selling to existing customers but only 5-20% to new ones. Second, driving traffic back to your stores allows you to put your best asset to work – your store associates.
Associates can leverage return situations to gather more intel on customers and learn more about their needs and what products may be a better fit. This creates a feedback loop where store staff can use what they learn to better serve customers.
On the spot, they can utilize two retail staples: upselling and cross-selling. Using what they learn about customers during the return event, associates can make targeted recommendations about alternative items or additional purchases. After the fact, they can follow-up through an app, SMS, or email to round out the experience. It’s all about ensuring the interaction is never one and done.
Every dollar of profit counts. Once you have the technological capabilities set up, it’s important you don’t simply copy the strategies of other retailers. Your customers are unique, so treat them as such.
With an omnichannel OMS, you have a well of insights at your fingertips. Time to put them to work. Aim to align your retail returns strategy and related policies with your customers’ true behaviors – or risk poor customer loyalty and margin erosion.
Dive into your data, and focus on the following areas:
Set yourself apart by going deeper in your analysis than your competitors. Get intimate. When you do, you can offer return experiences that truly satisfy your customers.
You may even stumble upon more effective ways to sell to and retain your customers in the process. For example, suppose you’re seeing a particular customer return items often. It’s likely they enjoy your brand – they keep buying from you – but perhaps they aren’t finding the items they love by browsing online. Instead of continuing to fire out push-marketing communications, you may have more success capturing their attention in-store.
Best of all, driving returns in-store can even unlock additional revenue, because 75% of shoppers using services like BORIS and BOPIS end up buying more items. And that’s perhaps the biggest benefit of in-store returns; the opportunity for store associates to turn lost purchases into revenue.
Today, shoppers have high expectations, so it’s critical to understand their wants and needs. Brands that invest in getting to know their customers often see an increase in CLV.
The bottom line: brands must be able to facilitate returns with the same friction-free experience as transactions. Deploying an end-to-end omnichannel system with a connected mobile POS and OMS can do just this. It will result in a simple buy, fulfill, and return experience for consumers.
A great return experience is key to customer retention and long-term business growth. A profitable returns process is possible – but only when it’s convenient, hassle-free, and demonstrates empathy to busy customers. While tricky, omnichannel returns are the key to a more enjoyable and profitable retail returns experience.
Ready to catalyze your growth? Speak to one of our omnichannel experts today!
