Retailers Tackle the High Cost of Returns by Incentivizing People Not To

Retailers are facing mounting pressure from the costs associated with returns, but they are also discovering ways to turn this challenge into an opportunity for growth, Catherine Dummitt, VP of marketing at Narvar, told PYMNTS.

Balancing the expense of returns with potential revenue involves a multifaceted approach that combines streamlined processes, advanced technology, and strategic customer engagement.

A primary strategy for mitigating return costs is optimizing the reverse checkout process, Dummitt explained, noting, “Making returns as smooth and consumer-friendly as possible is crucial for retaining customer loyalty and fostering repeat purchases. Implementing options like in-store returns, drop-off points, and box-free, label-free returns can significantly enhance the customer experience.”

Retailers are also focusing on incentivizing exchanges instead of refunds, Dummitt said, noting Narvar’s 2024 State of Returns Report.

By uniting expertise in eCommerce, supply chain management, customer care, and machine learning, Narvar provides retailers with a turnkey platform designed to convert shoppers into loyal advocates.

Since it was founded in 2012, Narvar’s platform has powered billions of interactions across every touchpoint — web, mobile, email, SMS, Facebook Messenger, Google Assistant and Voice for clients such as Neiman Marcus, Glossier, Everlane, Levi’s, Sephora, and Crate & Barrel.

 “Offering discounts or loyalty points can encourage customers to choose exchanges, which retains the sale and often leads to higher satisfaction,” Dummitt said.

Swiftly reselling returned items is crucial, Dummitt noted. Narvar’s report highlights that returns can be processed and returned to inventory 30% faster with optimized return routes, ensuring that items are resold while still in season. Store credit and instant refunds further encourage additional purchases by capitalizing on customers’ desire for immediate access to their funds.

Technology plays a significant role in enhancing the returns process, Dummitt said, noting the use of return management platforms “automates the returns process and provides real-time updates, which can reduce operational costs and improve customer satisfaction. These platforms also analyze return data to identify trends and areas for improvement, allowing retailers to refine their offerings and reduce unnecessary returns.”

Personalization is another aspect in the process, according to Dummitt, because “Tailoring the return experience based on customer segments can significantly impact retention and loyalty. For example, offering extended return windows to VIP customers can encourage repeat purchases and increase their lifetime value.”

Promoting buy-online-return-in-store (BORIS) options also reduces shipping expenses and facilitates faster restocking of returned items, driving additional in-store purchases, Dummitt said.

Preventing returns before they occur is another critical strategy, Dummitt said. “Ensuring accurate product descriptions and reliable delivery estimates can reduce return rates. According to Narvar’s report, 27% of returns are due to items not arriving by the estimated delivery date. Improving packaging is also essential; 29% of returns are due to damaged items or missing parts. Proper packaging and quality control can mitigate returns due to product damage.”

Retailers are enhancing their fraud prevention strategies by requiring photos of returned items and using account logins to verify returns, Dummitt said, noting 58% of fraudsters are deterred by photo requests and 51% by login requirements.

“To address diverse consumer preferences, younger shoppers (18-29) favor cash refunds and discounts, while middle-aged consumers (30-60) prioritize convenience and speed, and older shoppers (60+) prefer traditional return methods,” Dummitt added.

“Looking ahead, retailers are focusing on convenient return options, sustainability, and advanced fraud detection, investing in AI [artificial intelligence] and automation to streamline return management and boost customer satisfaction.”

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