Retail Returns Will Never be the Same

By Raj Ramanand, CEO and co-founder, Signifyd

The tipping point for online returns has been a long time coming.

In looking for the balance between protecting profits and providing fantastic customer experiences, retailers have accepted returns as the cost of doing business. They’ve blocked some customers from making returns. They’ve offered unlimited returns. They’ve limited the window for returns. They’ve offered unboxed returns. They’ve encouraged in-store returns. They’ve charged for returns. They’ve stopped charging for returns.

2025 will be the year that online retailers get serious about returns. The way the best among them will do that is by providing personalized returns and instant refunds.

How did we finally reach the tipping point? For one, all the tweaking and twisting of return policies haven’t worked. The cost in dollars, customer loyalty and to the environment caused by returns is worse than ever. Consider:

• Last year, returns cost retailers $890 billion, according to the National Retail Federation.
  
  
• Fraudulent returns accounted for about 15% of that staggering number — a typical percentage, historically speaking.
  
  
• Returns result in 9.5 billion pounds of returned merchandise ending up in landfills annually, according to commercial real estate company CBRE.

Offering personalized returns and instant refunds won’t be easy. But it is possible today — through data and machine learning. And it is necessary. Every merchant’s biggest competitor — Amazon — set the bar for instant refunds. When Signifyd asked consumers what made for a great returns experience, the top answer, cited by 48% of respondents, was instant refunds — more than free shipping, eliminating restocking fees or long return windows.

Providing personalized returns is exactly what it sounds like. Brands that embrace the concept will be able to offer returns that provide the smoothest tailored experience possible for each individual, based on a deep understanding of the returner’s identity, intent and reliability.

For more than a decade, Signifyd has been able to instantly determine at checkout whether an online transaction is legitimate or fraudulent. The concept is the same, though the technological task is more complex, when it comes to vetting returns.

Today, data and machine learning can provide the insights necessary for determining the legitimacy of a return request. Deploying a machine-learning solution means retailers can be confident in providing most customers with an immediate refund. In cases where caution is indicated, a merchant could issue a refund once it receives and inspects the returned item. Alternatively, a merchant might offer store credit. The important thing is that personalized returns mean an end to blanket policies that penalize the majority of consumers for poor behavior on the part of a small segment of shoppers.

Personalized returns focus on the customer as much as on the merchant. As it is, a customer returning a product can wait as long as three weeks before their refund appears on their credit card statement or in their account. The delay is often caused by the merchant’s need to receive and inspect the return to ensure it is getting back what the customer purchased. 85% of the time it is.

Why should a loyal customer — a shopper who finds a shirt doesn’t fit quite right or that a bike accessory won’t fit on their bike — have to wait three weeks to resolve their disappointment? They shouldn’t.

It won’t be long before consumers will expect instant refunds the way they expect free shipping today.

Online retailers aren’t doing themselves any favors with sluggish refunds. Survey after survey indicates that consumers take returns seriously, when selecting where to shop and especially once they’ve had a bad returns experience. Our polling, conducted by survey firm Talker, indicated that 65% of consumers would stop shopping with a brand based on a bad returns experience.

On the flip side, our initial research indicates that customers who receive an instant refund are significantly more likely to make a purchase with the same merchant in relatively short order.

And while that immediate sale is good news for the merchant, it’s nothing compared to the value of the longer-term relationship the merchant is building with that shopper. Consumers told us in a recent survey that they value a brand they can trust more than any other quality when shopping online.

Eliminating the wait for a refund not only validates the trust a loyal customer puts in a merchant, it also sends a message that the trust works both ways.