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E-Commerce return rates and how to maintain profitability

  • Saypr
  • 2020-03-20
  • Introduction

    If you have invested a tremendous amount of time, effort, and money in setting up and running your e-business, the last thing you want to experience is a worrying trend where a large number of your customers return the products they have already purchased. 

    A high e-commerce product return rate can adversely affect the reputation of your e-business which would lead to a drastic drop in conversion rates, and profit margins. However, the concept of e-commerce return is not a new phenomenon and there is hardly an online store that has not had to deal with this experience before.

    This article looks at the impact of e-commerce return rates on the profitability of an e-business and how improvements in the quality of your website can greatly reduce e-commerce return rates.

  • What is the e-commerce return rate and how does it impact profitability?

    Plainly put, the e-commerce return rate is the extent to which products purchased via an online platform are returned back to the seller or vendor. 

    The goods could be purchased from a vendor onboard online trading stores like Amazon and Alibaba. Here the online trading platform acts as a sort of intermediary between the seller and the buyer. The online trading store mediates in all aspects of the trading transaction. 

    Alternatively, the return of products could be direct to an e-business. If a buyer purchase advertised products from e-business and the goods are delivered to the buyer, the buyer may decide to return the goods within the time period allowed after the purchased good(s). 

    The reason for the return of purchased products can vary and it really all depends on the type of product purchased. 

    For example, if a pair of jeans is purchased  from an online clothing store, it could be returned for the following reasons;

    • If the pair of jeans bought is too tight due to it being small in size.

    • If the pair of jeans is just too large for the buyer.

    • If the buyer has a change of mind.

    • If the pair of jeans has a production issue and it is therefore defective.

    • For undisclosed reason(s).

    With regards to the last reason from the list highlighted, the buyer may just not provide a reason for the return or the reason is personal to the buyer.

    However, a defective product has a very big impact on the brand, in this case, the jeans brand. It is possible that an entire batch of similar sized and/or designed jeans in the market are equally defective. 

    This could lead to a very high return rate, as everyone that purchases the same product is more than likely to return the goods.

    As far as impact on profitability goes, if an entire batch of defective products is returned by buyers, it will be seriously damaging to the immediate profit margins of the business. 

    Such a large scale return can also adversely affect the e-business and lead to reduced target audience traffic, conversion rates, and consequently dwindling profits.

  • How can you avoid e-commerce returns by improving your website experience?

    To minimize e-commerce returns, you can ensure that every one of the products being offered for sale on your site is in tip-top condition. 

    This is the first step, as no matter how outstandingly good your website is, if you are selling substandard goods or products that are less in quality than what is being advertised, your rate of e-commerce return will only be increased.

    Once you have sorted out your product integrity issues, you can then focus on your website. Some of the questions you need to ask yourself include;

    • Does your website properly inform prospective customers of the product details?

    • What technical options are available for prospective customers? Options such as model number, size, weight, style and so on.

    • Do you have a sufficient image description of the product(s)?

    • Are the images clear enough and can potential customers zoom in and out and/or view the image in 3D?

    • Are your products described in detail including technical details?

    • Do you have a technical support/marketing team on-hand to chat with potential customers in order to ascertain what they really need?

    • Do you offer pre-sale, sale and after-sale online customer support?

    As soon as you are able to sufficiently answer these questions, you would have taken the second step in reducing the rate of return of goods to your online store.

    Here are some things to do in order to enhance your website experience and in effect minimize the rate of return of your products by customers.

  • Make your product photos as real as possible

    There is no point in having cartoonish product images or photos that are not exactly the same as the products you intend selling online. If there is one thing that most customers hate, it is deceitful marketing. 

    Where a customer buys a product only to realise that the photo shown online is different from the item received. You can be 99.9% certain that such a customer will return the product and ask for a full refund.

    However, if the photos of a product displayed online are realistic and a customer gets exactly what is advertised, then you are less likely to experience a large scale return of your products by customers.

  • Use high-quality photos

    Just as you need to ensure that you use only realistic photos when displaying your products online, you also have to make sure that the photos are of very high quality. 

    Hiring a professional photographer to take still shots of your products will save you loads of money in returns in both the short and long-term.

  • Use clear and well-presented product information

    Your product information is key. You need to provide very clear and concise data regarding every product that you put up for sale on your site.

  • Add Zoom feature so people can see the products in large

    A zoom feature included on your site is a nifty idea especially if you need people to view your products in different sizes and scales. 

    This enables a potential buyer to know exactly how your product looks and this ensures that they know exactly what they are buying before they dole out their hard-earned money in buying the item(s).

    In addition to this, you can also add a Size Guide, and the models size in your product photos so customers can see which size fits them best.

  • Use AR and VR technology so users can try the products online

    You can adopt the use of both Augmented Reality (AR) and Virtual Reality (VR) technologies on your site. 

    This way prospective customers would be able to try out your products online before they decide to purchase them. This reduces the likelihood of product returns.

  • Use product videos which are showing the product from all angles

    Another way of improving user experience on your site and reducing the rate of product return is to make use of product videos. 

    With product videos, your products are displayed from every angle to give the potential buyer a proper perspective of what they want to buy.

  • Leverage data-driven emails to target the right audience and decrease returns

    This actually speaks for itself. All emails sent out to prospective customers should contain detailed information. 

    The more useful data is sent out, such as; installation information, the less likely you would have customers returning purchased goods.

  •  Take care of your customer reviews and engage with them

    There is nothing as satisfying to a customer tan knowing that they can make enquiries and they would be attended to in the quickest possible time. 

    Customers like to feel important and it is your job to make them feel important. You do this by interacting with them in a variety of ways. 

    Respond to their email enquiries on time, comment on good or bad reviews made by customers. 

    Avoid living in a bubble where you do not believe that your customer's opinions really matter because they actually do.

  •  A/B test until you find the best UX with the best conversion rate

    Lastly, conduct several A/B tests to derive the UX that offers your site the best possible conversion rate.

    By doing this, you will be able to boost traffic to your site and improve the user experience of visitors. 

    In addition, you will also increase conversion rates, and last but not the least, minimize the rate of e-commerce product returns, and a drop in your profitability index.

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