For the last two decades, retailers spanning size, scope and price point have competed to offer their customers’ cheaper and more convenient shopping experiences.

While the logistical and environmental cost of facilitating returns is taking its toll, many fear rescinding the free, easy returns to which shoppers have grown accustomed. A 2022 consumer report, conducted by research firm TRC and commissioned by PayPal, demonstrates that 87 percent of shoppers say free returns are an important consideration when shopping online, and over 50 percent have abandoned a cart due to the lack of a convenient returns method.

Today, optimising this process is critical to retaining customers — and acquiring new ones. E-commerce returns company Happy Returns, launched in 2015 and acquired by PayPal in 2021, offers an in-person, aggregated returns service through a network of more than 5,000 brick-and-mortar locations across the US, from FedEx to Staples and Ulta Beauty. Almost 80 percent of the American population lives within a 10-mile radius of a “Return Bar”.

In a recent BoF Live event, Andrew Pease, senior growth director at Happy Returns, and consumer psychologist Kate Nightingale, discussed the strategies that bring returns in line with brand experience, and the opportunities it can provide to operate more responsibly.

Below, BoF shares condensed insights from the conversation.

Assess External Forces That Impact Return Rates

AP: “Inflation and the subsequent rising cost of living has impacted the way shoppers return products. Our recent survey revealed that shoppers under 45 are more likely to return an item because of economic pressures than they were previously. They are becoming pickier and more mindful of brands’ return policies. If you don’t have a great returns policy and convenient returns options, they are probably not going to buy from you.

“Consumers also tend to buy from the same sites over time. When they are trying a new site, consumers are increasingly exercising caution. They assess and say, ‘If I don’t like that, what happens?’ If they know it’s going to be okay to return, they are much more inclined to purchase it.”

KN: “The simple act of touching a product increases the sense of ownership by over 20 percent. Apple, for example, display their MacBooks open at a 30-degree angle in stores, so that customers have to touch the product to engage with it. When you remove that tactility, you have to be prepared for customer returns.

Brands have to understand that returns are a pain point that can very negatively impact consumer trust — and therefore their long-term customer value.

“Returning something is a hassle, and sometimes brands make the process difficult, be it because it is difficult to find information or they are slow to refund. Brands have to understand that returns are a pain point that can very negatively impact consumers’ trust [in brands] — and therefore their long-term customer value. Customers’ brains are wired to avoid pain and approach pleasure, so if we can make returns not only easier, but also introduce forms of pleasure through gamification or an additional experience, we will change the thinking and attitudes around returns.”

Make Returns Part of Inventory Management

AP: “Inventory glut forces brands to have giant sales, giant markdowns, that lead to an increase in sales — followed by an increase in returns that are very hard to manage at a warehouse operations level. Having returns come back in a systemic function, in clean, aggregated pallets rather than parcels coming in every single day, can also help your warehouse deal with higher levels of inventory. Knowing that the consumer has made the return, had the item verified as matching the purchase at a return drop-off location, and gotten their refund, which you don’t have to process, is a huge benefit.

“It’s counterintuitive that your best shoppers are often your highest returners. It’s important for brands to recognise that cognitive dissonance because those shoppers have the highest long-term value if you nurture them by providing a good return experience.”

KN: “Studies found that customers who returned an item and were refunded quickly actually had higher order frequency, higher average number of items per order purchased, and higher average item value compared to customers who did not make a return. A good return experience can make people buy more later on. It’s as simple as that.”

Consider Customers’ New Online Shopping Habits

AP: “’Bracketing’ is a massive change in how people purchase online. They are now using their closet at home as their own personal showroom — they are trying on things, with the anticipation of returning something they don’t like.

“There are two types of bracketing. The first is around basic size and colour bracketing, where consumers size up and down, or opt for different shades. And so three sizes and three colours equal nine brackets on that item alone.

“Hardcore bracketing is when consumers treat delivery like a department store, buying different things to try on, and maybe keep 4 out of 10. This practice is already table stakes in Germany, for example, and it is becoming more common in the US.

“That mentality is only going to grow — it is the consumer’s new way of working. Just under forty percent of people say they plan to do it next year, and almost 60 percent of consumers younger than 30 say they plan to do it this holiday season. On the flip side, courier costs [are] increasing massively. As those continue to grow, [bearing] the cost of those free returns, which consumers feel are so important, is hard.”

Shoppers associate with brands that share their own values. More than 40 percent of shoppers are willing to pay more for a more sustainable return method.

KN: “Consumers are personalising brands. Therefore, they are creating human-like relationships with them. When brands and retailers make the in-store returns experience an afterthought, they are evoking human responses in customers, and making them feel guilty.

“The returns centre in-store is usually in some basement or difficult to access — it is an ugly space, with no branding and terrible customer service. Why give customers that level of guilt while they already have grave amounts of pain because they have to go out of their way to return an item?

“Brands should make the post-purchase experience amazing, and accentuate their values instead of causing customers pain and guilt. That is how you acquire customer loyalty and heighten lifetime value.”

Leverage Returns to Encourage Operational Growth

AP: “Returns are a massive opportunity for brands. There are four key elements to the returns experience. Firstly, shopper loyalty and lifetime value — people that have great returns experiences become great returning buyers. Then, cost reduction, revenue retention and sustainability.

“On the customer service side, we helped one merchant reduce their returns-related customer service contact by 80 percent. There are dual benefits to this situation: by taking that weight off your team, you could also simultaneously increase your net promoter score (NPS) by delivering a customer experience that resonates with shoppers.”

Adopt Sustainable Practices As Revenue Drivers

AP: “Shoppers associate with brands that share their own values. According to a recent study, 41 percent of shoppers would be willing to pay more for a more sustainable return method. If they believe the process is more sustainable, they are more likely to buy and more likely to feel okay about paying more. Sustainable practices are therefore not a net loss, but can become a net positive. People think sustainability has to cost more, but it is cheaper if you do it right.

“Looking across our chain, we invest in sustainable, long-term solutions. Every tote bag shipped from a return bar is reusable over 100 times and the totes aggregate the returns of multiple shoppers. Talking about the cost impact of it in those terms, these bags are a fifth of the cost of a cardboard box. It’s compelling, and reducing the environmental impact is fantastic.”

KN: “Given that customers may be reluctant to pay a premium, brands and retailers should aim to change their subconscious associations with sustainability towards monetary savings — these return methods should be cheaper for the customer. The [onus] is on the brand to make that the most convenient choice.”

This is a sponsored feature paid for by Happy Returns as part of a BoF partnership.