In this interview series, the USPS will share the unique knowledge and insights it has gained from serving businesses, both small and large.
Acing return logistics presents its fair share of challenges for any-size business. How does a company measure the success of their return model? What steps can it take to combat higher-than-average return rates? The average retailer must answer these questions and more to keep their business afloat. Finding the answers can be time-consuming and frustrating, so we’ve brought the key information to you. Here we talk to the Director of Operations Integration at the USPS, Jim McNally, about the worth of analytics, loyalty programs and how to leverage your return rates.
What are the cornerstones of a good return strategy?
The answer depends on a company’s business model. At the end of the day, what experience does a company want the customer to have? That depends on customer needs and business needs. For some, returns are a function of revenue. One of the fastest-growing industries is saliva swab DNA testing. Companies in that sector want to see 100% of their shipments returned. As a result, they focus on providing crystal-clear instructions and pre-paid envelopes as incentives.
If you look at standard retail clothing companies, returns are also part of the business. Though these retailers want to keep returns down, they understand some customer groups tend to buy things in multiple sizes and multiple colors, and so they institute a liberal returns policy to keep their customers shopping. In comparison, electronics or appliance companies would rather keep their return rates low to cut back on expensive shipping costs. They’d rather customers call into a service line before sending anything back. Whatever strategy a company settles on, it’s important to strive for simplicity. This will drive additional loyalty and revenue.
What data should a company analyze?
First off, you want to know your return rates. Restocking charges can weigh a business down. Data can help you combat high return rates. The more sophisticated your measurements are, the easier it’ll be to pinpoint your problem areas. Trunk time is an important factor any business should consider. It indicates how long the shipment sits at the customer’s home before it’s dropped back into the mail stream. Being able to measure that time will help you understand whether or not you should include a late fee for packages sent back after a certain date. This will help you restock as frequently as possible.
Companies should also look to qualitative factors. Is one product being returned all the time? Is sizing becoming a major concern? Reading customer feedback and reviews can offer clues to these issues. Maybe it can help you improve the way you message something on your website. Maybe it’ll push you to include sizing guidelines. Studying this collected data can help a company improve its return rate over time.
Where can a company find this return data?
There are simple ways to do this. Companies can measure trunk time and transit times by printing their own return labels and utilizing the tracking information available to them. For those looking to get to the heart of their numbers, they could consider investing in a shipping software provider. These providers can support you with analytics to help you better manage your cost and services. They can help you collect the nitty gritty data. In some cases, they can even help gather information by product. For example, if you’re a mom-and-pop shop with a jewelry line and a shoe line, your reports could be separated by ounce-based returns and pound-based returns.
How should a company manage shipping costs?
We’ve seen this done a few ways. One company wanted their products to be at the top of the search engines, so they priced their items low and charged for shipping. Another company sold similar items but at a higher price point that included the shipping costs. Their items may have been more expensive, but as a result, the company was able to offer free shipping. Why take this route? They believed a liberal shipping policy would allow customers to order more items, which would result in higher profit margins. Some companies go even further and offer free return shipping as an even greater incentive for customers to shop with them. The fact is many shoppers seek out the cheapest shipping options available before choosing a retailer. In the end, a company should weigh the pros and cons of these strategies and consider their own long-term priorities before deciding which choice is best for them.
How can a business leverage credentialed accounts and loyalty programs to improve their return process?
Credentialed accounts are saved customer accounts with valid login and credit card information. When it comes to shipping, companies can use the data in these accounts—everything from order history to credit card information—to handle and optimize a return. How? From order history, they know exactly what weight the returns will be, because on the back end they have stock-keeping units, or SKUs, with all that information.
If they’re dealing with repeat customers or preferred customers who pay for a higher-level service, as soon as they see the tracking number for the return shipment hit the mail stream, they can credit the customer’s payment source. Any company with a strong loyalty program has the option to give credit immediately versus doing it at a later time, once they receive and scan the package in their shipping area. Refund time can have a profound effect on customer experience. Being able to offer your loyal shoppers an almost immediate refund leaves a positive impression, and may push them to frequent your business in the future.
How can a company make their warehouse return process more efficient?
It’s important to designate special areas for returns. A company doesn’t know which products are coming back when. If they have a catalog with a lot of SKUs, they could have pieces worth $25 and pieces worth $900 sitting in their returns area. To keep the packages safe and separate from outbound shipments, companies should, at a minimum, lock them in cages or keep them in a designated space. That way, you don’t mix them in with your outbound operations. To help ease this process, a company should also dedicate a special person or group of people to handle the products in the cage or designated area. They should be the ones to scan the products and ultimately restock them.
How can a home try-on company improve their refinement process?
We actually touched upon this with one of our clients a couple of weeks ago. Their clothing club business functions off stylist suggestions and algorithms. As the algorithm grows stronger, stylists are able to make smarter product decisions and the refinement process becomes more efficient. Here’s how they do it. Working off customers’ profiles, the company sends products tailored to their preferences. Once someone returns the shipment, the company keeps track of what’s sent back, plus any comments customers submit about what they liked and what they didn’t like. The algorithm then becomes more and more intelligent as the customers deepen their relationship with the company. As a result, customers are sent products they’re more likely to purchase, and profits go up. Not all companies will be able to invest in an algorithm, but including questionnaires on return forms can help a business learn more about their customers’ preferences and understand why their products are being sent back.
How else can returns help a business keep margins down?
Companies that see, through tracking, a large amount of returns coming back can plan around that volume. They can hire people to handle these difficult times. There’s nothing worse than being understaffed during the holidays or after the holidays—a big returns season. All of a sudden the volume is too high to handle, and there’s not enough personnel to keep your return process working smoothly. You need those extra hands to get your products restocked in a speedy manner. When dealing with temporary workers, companies should look at their return rates to help decide exactly how many people to hire.
A strong return strategy is instrumental to any retail business, especially a growing one. It’s important to nail logistics, look at analytics and tackle inefficiencies. Mastering these aspects will only make your business stronger, your profits higher and your customers happier.