The ‘Triple Crown’ of Harmonic Retail: BOPIS, Returns, and Customer Service

Retail is facing more stress and complexity than ever before. U.S. population growth is less than 1 percent annually, shopper journeys no longer follow predictable demographics, and customers are simultaneously demanding more human interaction and more self-service technology. Add to that the rising cost of shipping, the looming threat of tariffs, and the tight labor market. Retail isn't a business for the timid.

In 2017, retailers saw a 300 percent increase in the cost to fulfill omnichannel purchases, and that number only continues to grow.

The biggest challenges to retail profits can be attributed to three factors: the rising cost of shipping online orders, lost revenue from product returns, and lost customers from bad online reviews.

Traditionally, these challenges have been tasked to different departments within a retail organization, with marketing trying to manage social media, logistics seeking ways to defray shipping costs, and operations exploring third-party options to recoup on product returns.

Instead, in-store pickup, returns, and customer service should be treated as harmonic notes that work together. The impact they have on each other is significant. Rather than focus on department-driven strategies to manage these challenges separately, retailers should instead focus collectively on ways to remove department silos to craft an overarching Harmonic Retail™ experience, starting with the three biggest areas of impact.

Buy Online, Pick Up In-Store (BOPIS)

More than 68 percent of consumers have opted for in-store pickup so far this year. "Click and collect" is one of the most requested services in nearly every shopper study. Additionally, 85 percent of customers buy other items when picking up purchases in-store, and data shows that profit margins on items picked up in-store are higher, on average, than with "ship to home." So not only is BOPIS a customer favorite, but it also improves the retailer's bottom line.

Returns

A University of Texas-Dallas study found that while a lenient return policy did lead to more returns, it was even more strongly linked to an increase in purchases. Ironically, having the ability to return purchases gives customers the trust needed to make purchases. But what if you could have the trust-building benefit of a liberal return policy without having customers using it often? Frequent BOPIS users make significantly fewer returns — only 19 items per year — compared to shoppers who use BOPIS more sparingly.

Additionally, customers who use in-store pickup to examine or try on orders before leaving the store eliminate the problem of product damage or delayed restocking that are the largest drivers of lost revenue from returned items. Allowing customers the ability to try products when picking them up greatly increases trust, convenience, and shoppers willingness to purchase. It also enables more profitable product return handling for the retailer. A true win-win.

Customer Service

Shoppers still consider brick-and-mortar an essential component on their path to purchase in most industry sectors. While a sale might ultimately happen online, it's most often the result of two experiences: the ability to see the product in person and the ability to get advice from a knowledgeable expert. As labor markets tighten and wages rise, retailers are challenged to maintain a strong customer-facing workforce. Yet the cost of poor service is significant, with one negative experience costing as many as 30 potential customers.

Integrating tools such as video and live chat allow expert, engaged staff members to interact directly with a customer via mobile device regardless of where the customer — or the staff member — is located. Real-time customer service along the path to purchase can reduce returns by getting questions answered before a purchase is made. This also reduces the chance of negative reviews by leaving a customer standing alone in a store looking for help.

One retailer that understands Harmonic Retail™ is H&M. This fast-fashion retailer has seen its share of ups and downs, but over the past two years it has focused on honing its in-store pickup and return strategies, building an interstore employee communication tool to encourage staff knowledge sharing and engagement, offering expert personalized product and style advice to customers, and growing a large network of real-life brand advocates. H&M sales have, in turn, risen for the past five quarters.

Lost revenue from high fulfillment costs, depreciated returns, and poor service can be turned around. Harmonizing BOPIS, returns, and customer service to support each other as they center around the customer is a key strategy in achieving Harmonic Retail™. When done right, these services can not only increase shopper satisfaction and grow lifetime customer value, but also reduce friction points where sales margins, revenue, and customer satisfaction typically take the greatest hits. As retailers increasingly compete for the same pool of shoppers, harmonic strategies are an essential tool in keeping their businesses profitable.

DeAnn Campbell is vice president of retail strategy and research at Harbor Retail, fanatics about Harmonic Retail™ who discover, develop, design and build smarter-connected retail, at scale.