How to Reduce Your Return Rate & Predict Exactly What Customers Want

How to Reduce Your Return Rate & Predict Exactly What Customers Want

Did you know a secret to getting along with your spouse is, in part, one of the same things that also convinces customers to buy from you?

It’s the power of touch.

While there are a variety of factors that influence whether both your marriage and customers are happy, touch is one of the most important. Touch is the first sense we develop and it happens before we’re born and begin receiving tactical signals from our mothers while still in the womb.

It means we are born to touch.

Skeptical about the connection between touch and commerce? Consider that waitresses who touch their customers, even if the touch is brief and insignificant, receive bigger tips than those who do not touch. Additionally, an unrelated research project found customers who were touched in some way by sales clerks:

  • Shopped 63% longer
  • Spent 23% more
  • Purchased 49% more frequently

Psychologists have even found professional basketball players who chest bump, back slap, and high five more frequently early in the season are more successful, individually and as teams, toward the end of the season.

What exactly is it in a touch that means so much?

While the effect touch has varies based on gender and culture, scientists suspect touch may stimulate the pressure receptors on the skin and stimulate the release of oxytocin, a hormone believed to enhance feelings of trust and attachment while also reducing stress. People with higher levels of oxytocin, according to this study, tend to buy more things and spend more on conspicuous goods.

But what does any of this have to do with ecommerce?

The power of touch extends beyond people and to the objects we touch. Research suggests an item’s surface impact, or how hard, soft, heavy, rough, or smooth it feels, influences our thoughts and feelings. In fact, this study found consumers desire “tactile input” and are less likely to buy items they are unable to first touch.

Online shoppers have found a way around this though and it’s often at your expense. Since shoppers cannot touch the items in your ecommerce store prior to purchase, shoppers are simply buying the items blindly knowing liberal return policies allow them to send back anything they fail to connect with risk free.

It’s why the return rate online is as high as 50% in some cases.

Without touch, your spouse is more likely to return you to a life as a single person and your customers are more likely to return your products. This article won’t help you on the homefront, but it will show you how ecommerce companies are dramatically reducing return rates and offer four ideas that’ll help you do so as well.

The Free Do-Over Economy

Nothing is certain in the world of ecommerce except death, taxes, and returns. Ecommerce sales growth, according to eMarketer, is forecast to increase 14.2% to $349 billion in 2015. The pain associated with growth like this comes in the form of returns.

Analysts estimated nearly one third of all online purchases are returned. The news is even worse for specific ecommerce categories:

These rates are double or even 5x more than those of brick and mortar stores.

Returns can erode margins quickly. Consider what Prashant Modha, CFO at Mondetta Performance Gear, told Internet Retailer recently:

  • If a $40 item is returned
  • It can cost the retailer up to $15 in shipping & handling
  • Often, consumers buy two sizes of the same product with the intention of returning one from the outset

The average retailer, according to the trade publication Inbound Logistics, spends 8.1% of total sales on reverse logistics which includes taking back damaged, unwanted, spoiled, or counterfeit goods.

Now consider the average customer order year-to-date as of July 2015, according to Custora’s Ecommerce Pulse Dashboard which aggregates data from 100 U.S. retailers, is down 0.7%, and it’s clear ecommerce stores are not making up the difference by increasing average ticket size.

A quick note here regarding return rate averages; average industry figures can be misleading and vary widely by category. Marketing Land says higher return rates are generally associated with categories that offer expensive, fit-sensitive, and highly visible items.

The Serial Returners

Just who is it making all of these returns?

Online apparel is returned at much higher rates than other ecommerce items. It’s why ecommerce apparel retailers are leading the way when it comes to reducing return rates. To effectively do so retailers must first identify and understand the motives of serial returners.

Customer analysis data reveal that, for some retailers, certain customers are 15x more likely to return items compared to other customers. The data suggests the people who routinely return ecommerce items often have no intention of keeping what they originally purchase. However, the reasons for habitual returns often vary.

Here are three return customer personas:

  • The Wardrober- people who buy items to wear once and who have no intention of keeping them afterward. These people may not be able to afford to own the item or are taking advantage of generous return policies
  • The “Try It On” Consumer- people who order clothing online with the sole purpose of trying them on at home. These people have no intention of keeping the items they purchase
  • The Fitting Roomer- people who replicate the process that occurs in brick and mortar stores in which consumers go to fitting rooms armed with different sizes and colors of the same item, pick their favorite after trying everything on, and return the rest

Are Customer Returns Your Fault?

Unbeknownst to you, it might actually be your customer-centric approach to ecommerce that’s fostering returns. The more you de-risk the purchasing decision, the more returns you’re likely to see in some cases. In other words, not only do the incentives you offer convert prospects into customers, but they may also turn customers into product returners.

Offering free returns is one of those incentives.

We know free shipping entices consumers to spend more online. This study suggests that by offering free returns, consumers are twice as likely to spend more than $1,000 online. It appears free returns and free shipping are an even more potent combination. For instance, the 2015 Walker Sands Future of Retail Study found free shipping and free returns are now more important to consumers than fast shipping. Specifically, 83% of the 1,400 consumers surveyed said free shipping would make them more likely to shop online. Similarly, 65% say free returns make them more likely to shop online.

Image via: Walker Sands

Notice consumers also want you to ship all of the items they purchase at once and to make returning items easier. While providing such conveniences may help increase sales, analysts suspect it’s also a contributing factor to higher return rates.

It may be premature, but you’ll likely be forced to consider whether to offer additional shipping and return conveniences if and when drones are used for delivery. In fact, one-third of the consumers surveyed in the Walker Sands study expect to order something delivered by a drone within the next two years.

Image via: Walker Sands

Frequent promotions or sales, according to analysts, are also likely contributing factors to higher return rates. Keep this in mind when blindly offering promotional discounts to everyone, including segments of your customer base most likely to return items. You can also expect returns after heavily discounting items that were recently purchased.

Other Reasons for Returns

Besides not being able to handle and connect with ecommerce items prior to purchase, lenient return policies and free shipping aren’t the only culprits responsible for high return rates. The reasons for returns vary based on what you sell and to whom. Below are several factors plaguing ecommerce apparel companies:

  • Size- prior to the industry attempting to better size online apparel shoppers, apparel makers estimated 1 in 4 loose fitting garments were returned while almost 50% of all figure-hugging garments were returned
  • Quality- 23% of returns, according to this vendor, are due to the wrong item being shipped while 20% of returns are due to items being damaged. Additionally, perceived quality issues can arise when online apparel retailers switch manufacturers and ship items to customers who do not like the subtle differences between newly purchased items and those purchased in the past
  • Expectations- the purchased item may actually do what it is supposed to do but simply does not live up to the online product description or the marketing that convinced the consumer to purchase in the first place
  • Product images- 22% of returns, according to this vendor, are due to a product appearing differently in person than it does in a picture. High quality product images can not only boost sales but may also help you avoid returns from customers disappointed by the difference between the image and the actual product. NOTE: Be sure to check out Shopify’s Ultimate DIY Guide to Beautiful Product Photography so you can create high resolution pictures that allow consumers to zoom in for greater detail and to view items from different angles
  • Fraud & Abuse- while it doesn’t appear statistics for fraudulent or abusive returns are broken out specifically for ecommerce companies, we have data from The National Retail Federation that suggests it’s a problem (fraudulent or abusive returns include those in which stolen items are returned and consumers who purchase apparel to wear once with the intention of returning them immediately thereafter).

    Image via: The National Retail Federation

    Now that mobile is the primary access point to online retail for most consumers, poor mobile user experiences are also being blamed for higher return rates as it may be even more difficult for consumers to appropriately choose sizes or easily see product details.

    Wait, Could Returns Actually Be Good?

    If you’re online shoe retailer Zappos, an Amazon company, it can be.

    Zappos was one of the first to offer a generous 365-day, free two-way shipping and return policy that practically invited customers to order shoes, try them on at home, and send them back if they weren’t completely happy. Zappos’ executives are fond of saying that customer service is the new marketing. That lenient return policy, according to the company, is actually a profit center.

    Zappos says customers who purchase the company’s most expensive footwear ultimately return 50% of everything they buy. However, the margin made on the expensive footwear makes up for the added shipping costs. Here’s what Zappos’ VP of services and operations, Craig Adkins told Fast Company:

    Craig Adkins Quote

    It may work for Zappos in certain instances, but not everyone is willing to accept higher return rates without a fight.

    Retailers Retaliate Against Returns

    Ecommerce retailers, especially those selling apparel, are experimenting with technology and return policies to reduce return rates.

    Retailers are increasingly being urged to adopt simple, transparent, and generous return policies that inspire confidence and trust in consumers. However, some retailers are also implementing clear limits regarding the length of time consumers have to return unwanted items. Here’s what’s happening:

    • Consumers often wait until the last minute to return items
    • Average time to return is typically 2-3 days prior to the expiration of the retailer’s return window
    • This impacts inventory forecasting, budgets, and personnel

    Modifying the return window length, according to ecommerce marketers, can give retailers better visibility on returns and how they may or may not impact operations. The idea behind altering the return window is to influence the average time to return and reduce uncertainty for the retailer.

    But reducing the time a consumer has to make a return doesn’t provide retailers with all the data they need to better understand why an item is being returned. In fact, apparel industry veterans say even if you ask, customers may not tell you exactly why they’re returning an item:

    • Customers unlikely to admit an error while ordering
    • The majority default to the “it doesn’t fit” crutch

    Even worse, a consumer using an inaccurate online sizing tool or measurement calculator may not know it’s inaccurate and thus be unable to tell retailers. It’s why the online apparel industry is investing in fit technology, or virtual sizing tools, that actually work.

    • This tool helps consumers measure items in their closets and overlay them with items of interest on their screens
    • This tool uses 3D imaging technology to scan footwear and help consumers select shoes that are more likely to fit
    • This tool asks consumers to take a quiz, volunteer their their body types, and explain their fit preferences for accurate online sizing
    • This tool offers a virtual fitting room application that online retailers can use across channels to better inform garment production and design

    It appears some of this fit technology is working.

    For instance, online shoe retailer Running Warehouse calculated 65% of all returns were fit-related. However, after introducing an application that allows shoppers to find more accurate information about the shoe size they need, fit-related returns declined 23%.

    Here’s how the app appears to consumers:

    Image via: Econsulting

    What’s clear is that feedback is key. But not just any type of feedback. Rather than waiting for a return to ask a consumer for input, ecommerce retailers are flipping the dynamic and getting it during the ordering process. Not only can doing so reduce returns, but it cuts shipping expenses associated with generous return policies.

    There are even more sophisticated ways of getting inside the consumer’s mind to determine their waist size, what they actually want, and whether they’re likely to return a certain item. Here then are four of those methods which will help you better predict what consumers want and reduce the items they return.

    #1 Surveys for Liars

    You’re a liar.

    So am I.

    Or at least that’s what psychologists determined in a widely cited paper that argues positive self-deception is normal and can actually help us be more successful.

    In general, psychologists found we lie to ourselves in three ways. It’s the first way we lie to ourselves that is of most importance to ecommerce companies interested in ensuring consumers buy clothing that fits them appropriately:

    We View Ourselves in Unrealistically Positive Terms

    • Seth Godin has written books and blog posts about the lies we tell ourselves
    • So has Tom Asacker who argues we believe the future will be better than the evidence today can justify

    While telling ourselves we’re better, faster, and smarter than we really are may propel us to accomplish more than we otherwise might, it’s not a phenomena that lends itself to reducing fit-related returns in the online retail business.

    How so?

    If truth is in the eye of the beholder can we actually trust consumers to be honest about hip, waist, and bust size when asked during traditional surveys? If you believe so then you’re trusting liars to share with you intimate details about their imperfection in an unvarnished way to reduce your return rate.

    Let’s assume for a moment then the research is wrong and we aren’t all liars. Let’s assume consumers are willing to honestly share accurate data about their figures to receive clothing that fits. You still have a problem in terms of the survey you use to determine size and fit.

    It’s the same problem plaguing focus groups.

    Cognitive science tells us people have far less access to memories than we might initially suspect. While people can readily explain their thinking and behavior, Gerald Zaltman argues in his book How Customers Think that 95% of cognition takes place in the unconscious mind. We may not even be aware of the majority of our thinking much less be able to articulate it accurately to someone questioning us about it.

    Combine these two concepts and the traditional survey that asks consumers to be honest and accurate about body size has two powerful psychological phenomena working against it:

    • People are likely to perceive (lie) their body size in ways that are inconsistent with reality
    • People are unlikely to be able to accurately articulate their memories as they relate to apparel and sizing

    It’s why ecommerce retailers are using a bit of finesse when it comes to surveying consumers about their size and fashion preferences. By creatively identifying inconsistencies between a consumer’s perception of themselves and reality, online apparel providers can reduce fit-related returns and make better fashion recommendations.

    MM.LaFleur, an online apparel retailer that helps professional women build their wardrobes, sends customers what it calls Bento Boxes that contain 4-6 articles of clothing that are handpicked to flatter. To achieve this, the company designed a survey to subtly tease out size and fashion data.

    Notice the first survey question asks women to describe, with pre-selected words, their style:

    Image via: MM.LaFleur

    Compare this to the second question, which is very similar to the first, but requires women to select an image that represents their style:

    Image via: MM.LaFleur

    It’s an interactive way to identify any inconsistencies that may exist between what a woman says her style is and the style image she actually sees in her mind.

    Another subtle technique retailers are using to check the perceptions of shoppers is to ask for both quantitative and qualitative size and fashion data.

    For instance, immediately after asking for a woman’s blouse or shirt size (quantitative), Stitch Fix, which sells personally styled collections of clothing to busy women, asks how they prefer their clothing to fit on the top half of their body (qualitative):

    Image via: Stitch Fix

    Throughout the experience, Stitch Fix routinely checks for inconsistencies between what a woman says about her figure and what she actually prefers.

    This helps mitigate the lies we tell that can result in clothing that doesn’t fit appropriately. To address the second psychological issue we discussed, that we may not be able to accurately articulate what we want, online retailers like Stitch Fix are helping shoppers choose their words by offering drop down boxes with options:

    Image via: Stitch Fix

    Building surveys for liars is similar to the way personality tests are designed.

    To ferret out test takers who are being untruthful, personality tests ask the same or similar questions in a variety of ways over a period of time that makes it difficult for people not telling the truth to remain consistent.

    #2 Show Rather Than Tell

    Images dominate effective online questionnaires.

    Online surveys that accurately predict fashion preference and reduce fit-related returns are very visual in nature. This design choice is backed by cognitive science which tells us, according to research by Gerald Zaltman, that marketers often mistakenly believe consumers think in words.

    Zaltman points to brain scans which indicate we have thoughts long before we can actually express them in words. Rather than words, Zaltman argues in How Customers Think, our thoughts are actually based in images. His findings are based, in part, on:

    • Two-thirds of all stimuli reaches the brain through the visual system
    • 80% of all communication is nonverbal

    While oversimplified, Zaltman’s research suggests people can often better identify and communicate why they believe what they do by showing rather than telling. For example, instead of asking a consumer about a particular topic as one might in a simple survey or focus group, Zaltman argues we’ll uncover a consumer’s hidden thoughts and feelings by using a technique called metaphor elicitation:

    • Ask consumers to create visual stories or collages based on what they believe
    • The metaphors or images they choose represent their beliefs
    • These images often provide meaning people cannot provide with their words

    Asking consumers to visually represent their beliefs is exactly what online retailers are doing to better understand fashion and fit preferences. While it’s not practical to ask shoppers to draw or create collages, apparel retailers are doing the next best thing.

    For example, check out how Stitch Fix groups different types of styles to discern customer taste:

    Image via: Stitch Fix

    Women are asked to rate multiple groupings based on how much they love, like, or hate a specific collection. The style preferences teased out with images may then be compared with what shoppers say they like to flaunt:

    Image via: Stitch Fix

    Images are especially important to ecommerce companies like Bombfell, a personal styling service for men, which says guys often have no idea what they want but can immediately recognize pictures of styles they do not like.

    Image via: Bombfell

    Images are also being used to create virtual wardrobes.

    Keaton Row, a personal styling service for women, takes it a step farther by offering women what it calls a lookbook that contains more than one-hundred images.

    The images included in lookbooks are hand picked by personal stylists, based on preference and purchase history, and arranged in ways most likely to appeal to shoppers:

    Image via: Keaton Row

    Regardless of whether the goal is to identify what a customer wants or doesn’t want, images often provide insight words cannot.

    #3 Personalize the Experience

    Personalized online experiences are quickly becoming the standard as 70% of consumers expect you to interact with them on a more intimate level. Be sure to see Andrea Wahbe’s actionable piece about personalizing the customer experience even while you’re growing quickly. For all the talk about privacy, consumers expect you to use the data you have to treat them personally:

    Image via: AgileOne

    One way online apparel makers are accomplishing this is by connecting consumers with personal stylists. Keaton Row, a personal styling service for women, offers stylists a chance to build a business and earn unlimited commissions by helping sell the items they suggest to consumers.

    Image via: Keaton Row

    To provide an authentic personal touch, Keaton Row’s stylists ask for more than just the information requested during online questionnaires or surveys.

    For instance, stylists may ask consumers for access to their clothing wish list Pinterest boards. Obviously, the more data a stylist has access to the better they’ll be able to tailor the online shopping experience.

    This data, at least in the case of Keaton Row, is also warehoused for future use. Rather than shy away from discussing data collection with consumers, Keaton Row uses it as a selling point that removes the guesswork from styling while promising to improve future shopping experiences:

    Image via: Keaton Row

    Personalization can save ecommerce stores money.

    Data issues and technological issues aside, personalizing the shopping experience by segmenting your target audience can help you meaningfully reduce your return rate. Remember, research suggests certain customers are up to 15x more likely to return an item compared to other segments. Online retailers who have a clear picture of who their serial returners are can personalize the experience by:

    • Not offering deep discounts to serial returners
    • Not offering free shipping to serial returners
    • Identifying which items are more likely to be returned

    For instance, special promotions or discounts may be offered only to segments that are far less likely to return a specific item. While some online retailers are using algorithms to predict which customers are more likely to return items, segmenting your audience based on past behavior will help you achieve a similar outcome; tailored messaging that positions you to increase margins by reducing returns.

    #4 Inject Bits of Fun

    Did you know people who don’t have any fun are more likely to be fat, commit crime, and be less creative than others? Researchers say it’s true and suggest a lack of fun may inhibit brain development & result in an inability to generate new ideas. Fun, according to the research, fosters flexibility, thought, deed, sociability, and empathy.

    In fact, the happiest relationships are those in which fun is had, in part, because having fun provides us with a natural high.

    You want happy relationships with your customers, right?

    One way you can inject some fun and gain valuable insight into the path to purchase is to model a portion of your online questionnaire or survey after the popular Buzzfeed-like quizzes or contests in which you’re often invited to participate:

    It’s true that quizzes are used for lead generation. However, online retailers are using aspects of the online quiz to make the process of asking for bra and panty size a bit more enjoyable. For instance, check out MM.LaFleur’s question about girl crushes:

    Image via. MM.LeFleur

    How in the world does knowing whether a consumer admires Oprah Winfrey, Amelia Earhart, or Beyonce (not pictured) help reduce returns?

    A woman’s choice not only provides pricing cues, according to the company, but also insight into how a woman sees herself and the role fashion plays in the story she tells. The seemingly silly question helps stylists better design and suggest specific articles or combinations to clients.

    Fun is something men often complain is lacking during shopping trips. It’s why Bombfell adds some humor to the mix when asking men a question they may be uncomfortable answering:

    Image via: Bombfell

    When a man hovers his computer mouse over one of the body types an image appears that attempts to lighten the mood. In this example, hovering over the rectangle body type tells a man he’s in good company with the likes of actor Will Ferrell:

    Image via: Bombfell

    Surprises like these may prompt only a slight chuckle, but researchers studying the science of laughter conclude it creates bonds, makes us happy, and has the potential to reduce pain.

    Lastly, consider engineering some fun into the customer experience by using gamification. It’s exactly what online handbag retailer eBags did recently after determining prospects are often unable to verbalize what they want in a handbag. So the company borrowed an idea from an online dating application which asked users to rate people as “hot” or “not” in a split second. Similarly, eBags created a campaign that:

    • Displayed pictures of handbags
    • Asked women to click either an “X” or a heart icon to indicate sentiment toward the bag
    • Remembered the desired handbags for future retargeting

    Image via: eBags

    By adding gamification the result, according to this case study, was a mobile conversion rate for eBags of 10%. Doing so prevented women from having to sort through thousands of bags before narrowing the purchasing decision, and positioned the company to capitalize later:

    • The tool also collected data on preferred handbags
    • People were later shown the collection to shorten the path to purchase

    While gamification often promises a reward, online apparel retailers can use it to promote a personalized shopping experience or a better tailored virtual wardrobe as Keaton Row does. When you help users collect the rewards offered by gamification, you’re also helping trigger the release of dopamine which can cause people to experience pleasure.

    Conclusion

    Since research tells us people like to touch things before they buy them, shoppers are increasingly ordering items online, trying them on, and sending back what they don’t like or what doesn’t fit.

    The results are abnormally high return rates that cost ecommerce companies time and treasure. Online apparel providers appear most at risk. While you can’t do much in terms of offering touch online, you can stimulate other senses and cognitive functions to better predict the the apparel consumers are likely to purchase and keep:

    • Structure personal style surveys in ways that identify disconnects between consumer perceptions and realities
    • Construct image-rich questionnaires that assist consumers in telling you what they believe even if they’re unable to verbalize their beliefs
    • Personalize the buying experience and tailor promotional efforts toward paying customers and away from customers who habitually return items
    • Inject fun into the buying process with quizzes, humor, and gamification to emphasize sensory experiences beyond touch and improve conversions


    About The Author

    Nick Winkler is a contributor to the Shopify Plus blog. He helps individuals & organizations generate new leads, make more money, and ignite growth with story. Get more from Nick here.