How Effective Returns Management Can Help Retailers Sustain Growth

In today’s modern retail ecosystem, where retailers are deploying technology to deliver effective omnichannel offerings and curate high-quality customer experiences (CX), one challenge that still concerns many retailers is the returns dilemma.

In 2022, returned retail merchandise amounted to almost $817 billion in the U.S., a 7 percent increase from $761 billion in 2021. Of course, returns have a negative impact on profit and revenue. However, if not managed properly, they can also adversely affect customer satisfaction, customer loyalty, and the environment.

By improving returns management, not only can retailers save significant costs but they can also see increases in operational efficiency and long-term customer retention. In addition to efficiently managing returns, retailers can reduce them by fulfilling orders accurately, quickly and seamlessly. Incorrect items and delayed delivery are some of the common reasons behind returns.

Why Revamping Returns is More Important Than Ever

Streamlining returns has become integral to retailers’ needs. There are a number of negative impacts that returns can bring, including lost revenue, increased operational costs, and reduced customer satisfaction. If not managed efficiently, returns can further damage customer loyalty in the long term. According to a global survey, 81 percent of customers said that they would switch to a different retailer if they had a bad experience returning their merchandise.

In today’s retail environment, consumers not only demand their returns to be fast, but they require the entire returns process to be convenient. Waiting for returns to be approved or refunds to be processed can be frustrating for customers. Instead, consumers desire the entire process to be swift and smooth. Simplified returns processes that require minimal effort from customers can significantly boost their confidence in a retailer and can keep them coming back in the future.

Modern returns management tools that operate in real time can enable retailers to automate the entire process and completely streamline operations. Retailers can generate pre-approved return codes and include them with shipping documents to allow customers to return a product with minimal effort. This helps retailers simplify returns and deliver a frictionless experience for customers.

Once a return is approved, these tools can automatically generate refunds directly to customers’ chosen payment method without any delays. This not only ensures accuracy and spontaneity in refunds, but also keeps customers satisfied.

The Role of Technology in Reducing Returns  

To fix the returns dilemma, retailers must identify and address the causes that lead customers to return a product. Common factors that cause consumers to return an item include inaccurate item arrival, wrong sizes being sent, and late deliveries. In fact, 75 percent of customers in the U.S. returned an item last year because it didn't fit. Whereas 11 percent said they did so due to delayed delivery. Retailers that are able to deliver the correct product at the right time can reduce the chances of returns.

With an advanced order management system (OMS), retailers can automate their order fulfillment and boost accuracy while serving their customers quickly. How does this look in action? When a customer places an order, the OMS receives an order confirmation and a ship memo is created based on the allocated primary location. This enables next-generation automation and increased accuracy.

To further take their order management to the next level in today’s omnichannel world, retailers can deploy a well-integrated OMS that can communicate across all platforms — both offline and online — in real time. This can further help retailers manage their stock more efficiently by allowing them to fulfill orders based on automated custom sequences and avoid stock-outs. Ultimately, to both manage and reduce returns, retailers must be able to manage their orders effectively in the first place.

360-Degree Benefits of Efficient Returns Management

Modern customers require retailers to have simple and easy return procedures in place. If a retailer is unable to process a return seamlessly, customers will quickly switch to another that can. However, retailers that are able to make their returns well-timed and suited can improve conversion rates and boost customer retention.

In addition, effective returns management can allow retailers to streamline their overall supply chains and reduce additional expenditures on logistics, transportation and storage. What’s more, well-managed returns can also drive sustainability by reducing emissions from waste and unnecessary transportation.

In today’s competitive retail landscape, effective returns management isn't an option; it's a necessity. Retailers that want to prosper must lean on the latest innovations not only to ensure a high-quality customer experience during shopping journeys, but also to deliver a top-tier returns experience.

Amber Hovious is vice president of marketing and partnerships at Teamwork Commerce, a leading omnichannel solution provider.