01 Sep 2014
One of the most interesting things to watch as the e-commerce revolution begins to come home to roost is how the various companies involved cope with and adapt to issues that many brick and mortar retailers don't have to deal with. The primary problem, of course, with buying something online is actually getting the product into the hands of the customer. When e-commerce was just starting to take off, this was a frequently dodgy process, and was a leading cause of customer dissatisfaction. As retailers are beginning to discover, the problem of logistics has now begun to manifest in a different direction, as industries such as clothing and fashion accessories that were initially unable to find a foothold online are becoming more popular: the dreaded return policy.
As these industries broke into the e-commerce arena, one of the marketing tactics that most effectively swayed hesitant customers into a purchase was the prospect of easy and hassle-free returns. Customers embraced the idea, and for a while all was well - until online retailers discovered that a huge number of their customers were taking advantage of the policy to use their own living rooms as change rooms to model their purchases and then returning a huge portion of them, all on the company's dime.
Complaining that these chronic returners were costing the industry billions of dollars every year, various strategies were floated to combat the problem, but of course they were all rooted in big data, the wealth of customer information available to online retailers. Some retailers began to only include free shipping on certain products which are less likely to be returned, and some were simply revoking free shipping for customers who returned too often, and some have floated the idea of restocking fees on returned items to cover the cost of returns.
But like most solutions involving customers, it's a better choice to reward the actions that you want them to take rather than adopting punitive measures against the customers who abuse store policies. Instead of revoking access to the juicy deals and helpful policies and risk driving away customers or creating negative perceptions, it's better to adopt new strategies to reward customers with low return rates, or at least those with a desirable purchase-to-return ratio. After all, if a customer returns 10 things but buys 50, the costs of processing the 10 returns pale in comparison to the profit generated overall. Big data, that most fantastic tool of the online retail world, tends to offer the answer in the online world - the challenge lies in combining its findings with more conventional marketing wisdom.