Time-consuming shipping processes, tedious returns handling and then even higher costs as a painful consequence. Returns in particular are often seen as a worst-case scenario, or simply still have a negative connotation. However, the entire e-commerce logistics, and returns in particular, can be much more efficient than expected. For example, virtually independent returns portals for customers are no longer a rarity. But how do these forms of shipping and returns work in detail? What are the challenges and how can we not only optimise but also strategically improve customer loyalty?
Esther Schwan, Content and PR Lead at fulfilment service provider Alaiko, provides an insight into the e-commerce logistics industry and gives us valuable tips on which strategies can help improve shipping processes and returns handling.
Shipping and returns - the biggest challenge
Of course, factors such as the speed of delivery, tracking and tracing status or the way returns are handled and customer service is provided. Not just for customers, but even more so for businesses. Whatever your positioning in any of the above areas, customer satisfaction is the ultimate goal, and worth the time and money invested, isn't it?
Not quite, because on the one hand the costs must not be neglected and on the other hand the customer should find the process as simple as possible. To sum up, the most important question is: for whom should logistics and returns be optimised? The company? Or the customer? Ideally, it is a mixture of both.
Esther Schwan also believes that regular evaluations make sense: "Every few months or even every six months, you can save a lot of money in the long run by looking at the conditions for warehousing, delivery or the fulfilment service provider in general.
Control and influence therefore play an important role in optimising logistics processes. Together with the question of who it is primarily for.
Returns are still a bad thing, aren't they?
However, when it comes to returns, the basics should not be ignored: Secure packaging, especially for products that break easily, is still more cost effective than dealing with returns and subsequent replacements.
After all, in the years before the pandemic, around 30% of returned products were returned because of damage. And these products, says Esther Schwan, were not sent damaged: "Something probably went wrong with the delivery."
Such reasons for returns can probably never be ruled out 100% - there is always something. Nevertheless, the various reasons have an overall impact on customer satisfaction - and, of course, on the final cost.
When costs get out of control
Fast, reliable logistics and a straightforward returns process have long been key success factors for online retailers. But: Returns, in particular, are now accepted as an integral part of the customer journey. Returns due to different customer preferences, such as colour, style or size, account for around 70% of the total number of returns. In the US market, customers will return products worth around €390 billion in 2020. The cost of this will be the equivalent of around €92 billion.
However, the real cost driver in the above statistics is anything but unexpected. More and more customers are planning to return goods when they place their order. The logical consequence is that companies are allocating more resources (money, time, staff) to deal with the extra effort.
But is this really necessary?
Data analysis around shipping and returns processing
"In general, customer satisfaction is closely linked to the whole shipping process. Nobody likes long waits. But not at any price, sometimes good tracking is enough."
Dispatch and returns processing offer a great deal of information and thus even greater potential for optimisation. The whole process is planned as an integral part of the customer journey and therefore needs to be designed in a positive way. If the reason for a return is dissatisfaction with the product or the delivery itself, action must be taken. This is also why the data collected about this process is so valuable. Are certain product groups more likely to be returned than others? Is the product description in the online shop inadequate, or are the images not representative enough?
"In order to get the most accurate data possible and to be able to optimise processes on an ongoing basis, it is necessary to enable customer-friendly returns processing and to set up a process that provides you with a lot of detailed information.
Improve customer loyalty via returns processing
How companies handle returns can be crucial. While many companies offer a simple refund, it makes sense to think outside the box: free exchanges, vouchers or discount codes worth the returned order towards a future purchase - the options are obviously many.
Regardless of how the process works, most customers, around 60%, expect the returns process to be completed within a month of the order. Time is money, literally.If customers are able to register their returns in a clear and straightforward way, the potential for customer retention at this stage of the customer journey increases significantly.
Shipping and returns: best practices and third-party providers
The calculation is simple: if the returns process is quick and easy, around 90% of customers are willing to place another order and express their loyalty. Less complex and professional returns logistics processes are a must-have. And this, of course, is where third party logistics providers (3PLs) come in.
Returns are usually find their way directly back to your fulfilment partner, where they are sorted according to the return conditions, processed and, if possible, made available for the next order. Transparency is key. Even with third-party providers, customers should be able to see the status of shipping, returns and refunds at any time. And if these processes take place in different regions or even internationally, they should be coordinated separately. From the registration of the return, through processing by the fulfilment partner, to refund and customer feedback.
Shipping processes via Shopify Apps
As Esther Schwan already mentioned: A regular evaluation of the shipping service provider can prove to be more cost-effective in the long run. Especially in the case of several markets that have to be served - internationally.
Depending on the local, regional and international reach of a shipping service provider, the corresponding costs will also develop in most cases. Possibly even the size and weight of a package may also affect the price. Again, there are already helpful, certified Shopify apps that can help. All shipping processes can thus simply be streamlined and with less effort. For each new order, the order status can be automatically synchronised with the online shop in real time via the app. This saves time losses right from the start, which in turn can have a positive effect on the conditions with many shipping service providers such as DHL, GLS or Hermes. In particular, the ability to process shipping labels within a few minutes or even seconds of an order proves to be an effective time saver.
Automated returns processing via Shopify Apps
Returns can also be handled automatically via Shopify apps. Although the majority of returns are still handled manually, a good third of all Shopify stores already use apps for this purpose. For example, customers can decide locally where they want to drop off a return. Tracking is also provided directly available to the customer via the app. And before it gets that far, Shopify apps also offer the option of encouraging customers to make an exchange, i.e. to place a new order, rather than simply allowing a return.
This approach follows the principle of using new incentives to positively influence a new purchase decision. In other words, after the purchase is before the purchase, as these apps automate all subsequent processes even more efficiently.
Streamlined shipping and returns processes save time and money
As well as helping customers, these ideas and actions will help you and your business save money. Customer service no longer has to deal with nagging questions like "when will I get my refund?" Instead, these resources can be redeployed elsewhere.
All this has a positive impact on customer satisfaction and loyalty. Professional returns management complements other touchpoints in the customer journey, giving you more opportunities to reach, inform and ultimately delight customers with customer service. Read one of our other articles to find out how you can increase your sales through perfect returns management and what you need to look out for.
We would like to thank Esther Schwan for her expertise and tips on shipping and returns in e-commerce and wish her continued success.