Luring Savvy E-Shoppers With Slick Return Policies

When the last of the ribbons float to the ground and the mountain of wrapping paper is folded up for recycling, chances are that most households will have at least a couple of gift items that don't quite fit the bill.

Many gift recipients will be among the mob that hits the malls in the days after Christmas, looking to exchange their white elephants for on-sale treasures. However, recent data shows that a big chunk of those gifts will have been purchased online and also must be returned that way.

In fact, according to a survey conducted by Harris Interactive and commissioned by returns software maker Newgistics, many folks would rather spend the days between Christmas and New Year drinking egg nog and watching the mail carrier take away their unwanted, wrong-sized items. That's especially true if they opted for online shopping to begin with.

Planning Ahead

This year, the fifth year of the Harris-Newgistics survey, 64 percent of adults reported doing at least some shopping online, Michele Koehn, Newgistics spokesperson, told CRM Buyer. That's up 10 percent over 2006 and 25 percent over 2004. Clearly, more and more consumers are making online buying a part of their overall holiday shopping planning. The issue, though, is how well those online retailers are making returns part of their overall customer service strategy .

About 90 percent of adults surveyed indicated that an easy-to-use returns policy greatly affects whether or not they will patronize an online retailer again, Ken Johnson, Newgistics' vice president of marketing and sales , told CRM Buyer.

In addition 68 percent of respondents reported that they consider being able to make a return from home before choosing an online vendor. "If you're going to do business online or through a catalog," he stressed, "you better have a convenient return process. To the extent that you don't have one, you're losing customers to another retailer."

Comforts of Home

So, what makes for a so-called "convenient" return policy? As it turns out, customers value being able to stay home when making returns as much as they do when armchair shopping, said Johnson.

That is, they want to be able to access the retailer's Web site, print a return authorization, and leave the package on their porch for pick-up by a mail carrier or delivery person. The challenge is making that process as seamless as possible for the customer while keeping costs as low as possible for the vendor, he explained.

To accomplish both goals, the returns system must address the wide range of circumstances under which a customer might choose to return an item, said Johnson. Just as in a brick-and-mortar store, online retailers face both legitimate and illegitimate returns and must choose which to accept. For example, computer software must have its shrink-wrap intact in order to be accepted back. Clothing items might need to meet a no-wear or no-laundering requirement.

"Return authorization engines are rules-based to determine whether or not a customer can have a return authorization," he noted. In other cases, a customer might be routed to a call center to work out the details of the transaction before a return authorization can be issued.

"Free" Is the Season's Hot Button

Thus, printing that return shipping label at home is one element of a convenient returns policy. At the same time, picking up the shipping charges is another, Richard Feinberg, director of the Center for Customer-Driven Quality at Purdue University.

Customers are getting more sophisticated about checking on the service policies of online retailers before clicking that "put in my shopping cart" button, Feinberg noted. The hot button of the season for online retailers has been free shipping, and that concept applies to returns as well as purchases.

Many online purchases are made without a customer actually seeing and feeling the product, Feinberg noted. While company Web sites are presenting much more graphically rich experiences to customers, a screen will never be the equivalent of being able to try on a piece of clothing, for instance.

"I can't imagine that a place like Zappos.com doesn't have returns up in the 30 percent or 40 percent range," he noted. "If I buy a pair of shoes and don't know which size will fit me, I might order two or three pairs at once and return the ones that don't fit."

The question, Feinberg stressed, is whether or not the profit margin the company -- any company -- is making on sales is enough to make up for the free shipping or other perks provided around the returns process.

Feature-Rich Shopping Extends to Returns

Over the years of e-commerce's increasing popularity, retailers have learned that customer service is key to not just luring buyers the first time but ensuring that they will come back, stressed Feinberg.

Free shipping has proven to be one of those features that attracts shoppers back to a site and increases the number of items they order, he noted. Thus, free shipping on returns extends that experience to the after-purchase period, the time during which a consumer may be deciding whether to patronize a retailer again.

Nordstrom, for example, offers free returns shipping to customers at a certain level in their preferred customer program, Feinberg said. This goes along with the other kinds of online shopping perks companies like Nordstrom, known for focusing on customer service, have rolled out, such as live chat, product videos, order tracking and product ratings.

Overstock.com is another online retailer doing innovative things with the returns process, explained Johnson.

"They have a very broad product set," he noted, so the site must be able to accommodate a wide range of rules for returns.

In addition, Overstock.com has taken steps to roll the feedback received through the returns process back into its product presentations. For example, if the return rate is higher than expected on a particular item, marketers can make changes to the online presentation of the item to address any misperceptions created as products are presented on the Web pages.