Prior to peak trading in 2023 we saw reports of return levels in the UK alone hit an excess of £4bn. Fortunately, this doesn’t mean that you need to suffer bleeding margins or accept a reduction in your customer lifetime value (LTV). Often you just need to match the right strategy with the right capabilities in your technology stack. So what are some ways you can boost CX and LTV, minimize your costs and environmental impact? And how can a modern order management system (OMS) like Fluent Commerce enable this?
Design your strategy with flexibility in mind
Choosing a returns policy that works for your brand and customers is important. Without good data and a flexible strategy, it’s easy to get caught playing returns roulette. Flexibility isn’t just giving your customers flexible return options. It also means being able to design your returns processes in the most efficient way for your unique business needs. Let’s look at an example.
Say free returns are core to your proposition, but serial returners send back discounted stock en masse. Maybe you sell a mix of small and bulky items. Free returns get expensive if there are splits involved in the reverse logistics. Using data and technology to adjust or pivot your strategy will be key to keeping costs low without disappointing customers. This is where a dedicated OMS can help keep your strategy flexible.
An OMS tracks every event related to inventory and orders, and all of the related contextual data. Access to all of this data in a single location can help you shape your strategy as it evolves. A modern OMS also gives you total control over how you manage your inventory availability and order orchestration, including the inverse—returns. It has the flexibility to adapt to your company’s strategy, letting you deploy changes quickly and independently. A flexible approach can also help reduce costs. How?
The Returns Cost Centre
Some costs for managing returns are obvious and others hidden. What are they and how can you reduce them? Take an obvious one like shipping costs. Charging for returns like ZARA may not be right for you. But could you offer free “in-store” returns? An OMS already plays a big role in reducing fulfillment costs by enabling brands to ship from anywhere. Integrating stores into the returns process can reduce these costs in a number of ways.
The OMS will track reason codes for returns. This can help orchestrate the return to improve the speed of getting your inventory rereleased for sale, faster. Mapping reason codes into the workflow (e.g “wrong size”) means you can automate specific processes where inventory can be added straight back into your available to promise pool automatically, or alert your staff where manual intervention is required.
What about other hidden costs like your call center? Depending on transaction volumes, these costs can add up quickly. Similar to orders, transparency and frequent communication for tracking returns can significantly reduce the volume of calls. Less calls, less costs. The OMS is orchestrating the entire lifecycle of an order and can trigger events automatically, like your customer notifications. This also reduces friction in your process and improves CX.
Once you’re equipped with some ideas to reduce the cost of convenience for returns, how can you make sure you’re not losing customers due to a lack of returns convenience?
Return-Churn is real
To start, you need to make sure that your policy is clear and consistent anywhere you interact with your customers and as frictionless as possible. A reduction in customer LTV over a poor returns policy hurts. Next, you may want to look at ways you can use your returns strategy to improve LTV.
We are seeing trends encouraging loyalty programs and exchanges over refunds, especially where an exchange is applicable. Converting a return to an exchange will increase the LTV of that customer. An aggregate view of inventory availability from an OMS can seriously change the game here. Imagine your store associates or customer service reps being able to confidently promise your customer the correct size by next business day? No refund processed. Happy customer. And think about your upsell opportunities. What’s one more area to consider?
Recommerce
Recommerce is not a new idea by any means, but it is growing in popularity. Especially with younger shoppers. With the increased pressure on retail leaders to operate more sustainably, it is a great way to reduce your impact on the environment. Could an initiative like this add more costs? Well, it depends on your brand, products, margins and returns strategy. Especially if repairs or refurbishments are involved. Footwear, apparel, luxury and jewelry have a well established market in recommerce. Some challenges would be deciding if you own your recommerce channel or go through an existing marketplace. What if you sell electronics or appliances which require repair? You may want to focus on costs to preserve margins. If you’ve got an OMS in place, this is a breeze.
The beating heart of your omnichannel strategy is already orchestrating your inventory and orders. If you want to add your own recommerce channel, integrate with an established marketplace or keep inventory and fulfillment costs down, your OMS can do this seamlessly. All while offering the same great customer promise and notifications that you have with your core business. With recommerce and an OMS you can add value to the life of your products, reducing waste and promoting a culture of recycling.
Summary
When it comes to returns, It’s crucial to align your strategy with the appropriate capabilities. Don’t allow a poor returns process to diminish your margins, add unnecessary environmental impact or jeopardize customer satisfaction. A modern, flexible order management system can enhance the returns experience for all involved. Contact us today to discover more!
