Return Policies

Why Return Policies Are Critical to the Retail Customer Experience

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A shift is playing out in retail returns. The hangover from the pandemic era of very generous policies has struck, and many retailers are now figuring out how to pull back on policies such as free returns while maintaining a positive customer experience.

Tasha Reasor, SVP of marketing at the returns company Loop, weighed in on how retailers can strike that balance.

What are the major trends in the returns space? 

The first trend impacting the returns space is fees. Due to the sheer cost of reverse logistics coupled with persisting economic uncertainty, major retail players, such as Abercrombie & Fitch and J. Crew, axed the practice of free and limitless returns late last year. These retailers are now charging consumers between $4 – $7.50 to restock merchandise. This is a trend that will persist throughout the year as others in the space follow in their footsteps. 

However, while consumers are willing to pay for returns, retailers implementing fees must provide an improved return experience to compensate for the change. Our recent consumer report found that 70% of consumers are willing to pay for returns if provided a more convenient, premium experience – and 50% already have. 

Another trend in the returns space is the increasing popularity of recommerce. Less than half of returns can be resold at their original price. Returned items that come back damaged, out of season or that just cannot be resold as new lead to monetary loss as well as unnecessary and unsustainable amounts of waste. Recommerce is a newer trend that merchants are adopting to save money on wasted returns, boost profit margins, and promote sustainable behaviors. 

A third trend impacting the returns space is the expansion of return options. The traditional process of packaging and dropping off returns is not the most convenient consumer experience. Consumers need lower-friction options such as at-home pickup and boxless/labelless returns. To accomplish this, a growing number of retailers have partnered with delivery partners. 

How do return policy preferences vary across generations? 

Preferences, unsurprisingly, vary greatly across generations. For instance, younger consumers are looking to push the boundaries on standard return options, and they’re eager to take their business to brands that live up to this expectation. Our recent data found that while consumers 25+ prefer to return their items in-store, more than half (51%) of Gen Z shoppers prefer at-home pickup. Furthermore, 70% of consumers between the ages of 18-24 and 82% of consumers between the ages of 25-40 are willing to pay a small fee for more convenient, premium return experiences. But, only 39% of consumers between the ages of 57-75 are. 

Our report also showed younger shoppers are sounding the alarm for more sustainable return experiences. These shoppers are more likely to always review a retailer’s return policy to gauge how sustainable their business is (~41%), shop with a retailer that offers eco-friendly or sustainable return options (~91%), and purchase from retailers that clearly communicate the sustainability measures in their return process (~83%). 

How should brands and retailers respond to these generational differences? 

Retailers must understand that it’s time to drop the one-size-fits-all mindset in reverse logistics. While returns policies overall act as a driver of customer-brand relationships, what resonates with one customer isn’t guaranteed to have the same impact with the next. Additionally, now more than ever, customers are looking for a relationship with brands after making a purchase. Consequently, and in order to win shoppers for life, retailers must develop reverse logistics strategies that meet the expectations and preferences of shoppers across all generations.

How does an effective returns strategy drive overall retail results? 

Return policies have an impact on whether or not a shopper buys from a particular retailer in the first place, and their experience actually returning a product could determine whether or not they buy from them again. Many brands view customer returns as a cost center and fail to extend customer journeys beyond the point of purchase. By doing this, they’re missing out on a critical way to increase retention, as one bad return experience can result in complete consumer abandonment. 

A consumer report we ran back in August of 2022 found that post-purchase incentives and environmentally friendly return options boost shopper retention. Additionally, the study found that 96% of U.S. consumers believe retailer return policies directly reflect how much a brand cares about its shoppers. What’s more, prices are no longer the only way for brands to attract shoppers. The modern shopper picks his or her favorite brands based on a nuanced shopping experience and he or she views the post-purchase experience in the same light. 

In the end, retailers must invest in the returns experience as if it is a crucial part of their brand reputation, profitability, and customer retention equation — because it is.

Joe Zappa is the Managing Editor of Street Fight. He has spearheaded the newsroom's editorial operations since 2018. Joe is an ad/martech veteran who has covered the space since 2015. You can contact him at [email protected]