5 Ways to Boost Profitability by Segmenting Customer’s Return Habits

Virginia Bingol

Virginia Bingol

Content Specialist
440 Industries

Introduction

There is one part of a retailer’s supply chain that often gets overlooked, and it’s the last step of the process: returns. It is by far the least glamourous step – after all, the hope is your customers purchase your product, love your product, and keep your product. But, we know this isn’t always the case.

The return process occurs more behind the scenes, and oftentimes is not advertised as a sustainable competitive advantage to consumers, because why would it be? When I buy a piece of clothing online, my first thought isn’t, “how am I going to return this?” However, while I was doing some research, I realized while return policies aren’t a reason to bring in consumers, they certainly can affect whether or not they build loyalty, as well as how much money your company loses in the process.

Most consumers can fit into a few categories based on their habits of returning merchandise. To determine which kinds of returns are most prominent in your business, you can add a satisfaction survey or questionnaire to the return page on your website. By understanding how to segment your customers based on this information, your company can spend less money on the return process, as well as build customer loyalty with your return policies. Keep reading to find 5 ways to do so based on your different customer segments.

Here’s a breakdown of the topics we’ll be talking about in this article:

  1. Dissatisfied Customers
  2. Trend Victims
  3. Size Questioners
  4. Sale Seekers
  5. Gift-Returners
  6. Conclusions

1. Dissatisfied Customers

The most obvious reason a shopper may return merchandise is because they are unhappy with their product. This could happen for a number of reasons stemming from both online and in store purchases, including:

  • They didn’t look how they thought they would in the product
  • The product they received was damaged
  • The quality of the product purchased was different than anticipated
  • The product did not match its description

If a customer is returning a product for dissatisfaction reasons, they are likely to form negative attitudes towards your company as a whole due to their unpleasant experience. The return process may be the first true interaction that a customer has with your company’s customer service policies. Therefore, it is crucial to change those negative attitudes back into positive ones during this step in the supply chain.

How to Deal with Dissatisfied Customers

 First of all, let’s discuss how to prevent your consumers’ dissatisfaction. On an e-commerce platform, this is where visual depictions and well-written product descriptions hold importance. On your website, be sure to include well-lit pictures of your products from all angles. The goal is to let the consumer know exactly what they are getting when they order your product. In the product description, include as many details as possible from the material of the item to the details the customer might not see from the pictures included. If you are trying to prevent dissatisfaction with in-store shoppers, encourage them to try on all similar options before they bring an item home. This will ensure that the customer feels confident they have found the best option for the product they are looking for.

If a customer is still unhappy with a purchase, be ready to listen to their complaints and be compliant with their wishes. This is where customer service is of utmost importance. If your returns are mainly being made by customers who are unhappy with a purchased product, make the return policy smooth and convenient in order to assist them with their returns, as well as having amicable customer service that is easy to reach.

2. Trend Victims

In the recent years, especially with the rise of online retail channels, it has become more common for shoppers to buy a product, wear it once, and return it in hopes of getting their money back. Another name for this method is “wardrobing”. Although this practice is considered morally questionable by many, people who fall victim to fleeting trends still take advantage of return policies that let them get away with it. This will often happen with products for special occasions, such as an expensive dress for a one-night event, a TV to watch one sporting event, or a pair of hard-to-match jeans that will really only look good with one outfit for one Instagram picture. This method is what costs businesses the most money on returns.

How to Deal with Trend Victims

If many of your shoppers partake in this practice, you are probably losing an unnecessary amount of money on shipping costs. If this happens too often, your company is probably taking an overall loss on its merchandise. In this case, it may be beneficial for your business to enforce more strict return policies in order for them not to be abused by greedy customers. For example, drop shipping companies and retailers with very small profit margins, such as Shein and Zaful, make it so hard to return items, it’s almost not even worth the hassle. In order to get a free return shipping label, the customer must write a description of why they are sending the item back and often times they are asked to include a picture to prove their dissatisfaction with a product.

This method of enforcing stricter policies can still work in conjunction with good customer service practices in order to maintain a positive positioning in shoppers’ minds, keeping in mind that the goal is not only to minimize loss, but to gain loyalty as well.

3. Size Questioners

Another trend in return habits is when customers buy more than one size of a product to use their home as their personal dressing room and return the sizes that don’t work. This practice is used by all kinds of consumers; no age, gender, or any other demographic can be ruled out of this method. As a consumer, I understand the occasional need for this – a medium at one store can fit like a large at another, and when online shopping it’s nearly impossible to tell how something will fit. However, from a business perspective, this is another source of profit loss on merchandise when a retailer has to pay for shipping and reimburse customers.

How to Deal with Size Questioners

The important part of ensuring customers do not need to buy more than one size of an item pairs is similar dealing with dissatisfied customers. If the shoppers know what they will be receiving before purchasing, they are less likely to have to play a guessing game when it comes to your products.

To do this, you can include an accurate size chart on your website. Also, encourage customers to leave reviews on the products they have bought by offering an incentive to post their thoughts on the fit and size of the items, and even more if they include a picture wearing the item. This way, other customers will feel confident in their buying options.

Another solution to giving an accurate size depiction would be to include pictures of different sized models wearing each product. A company that effectively does this method is lululemon. Each product page you visit, you have the option to view the product on a model with a more petite, mid-size and fuller body size. This simple feature can help your online shopping experience run smoother and reduce the number of returns per customer.

4. Sale Seekers

Another source of unnecessary returns is when customers take advantage of ongoing sales on merchandise, only to return some of the products. For example, if your company is running a sale where if you spend $200 to get $50 off your purchase but you can’t quite fill your cart to $200, you can add a last item in your cart in order to return it later to still get the offer. While this may feel like a creative hack as a consumer, if you are running a business, this can be detrimental to your profitability.

How to Deal with Sale Seekers

Dealing with sale seekers may vary from business to business. One suggestion might be to revise return policies while running these sorts of flash sales. Clearly display the new policy in the terms and conditions of the sale, and again while checking out. An example of a return policy during the time of a sale might be that the consumer may not receive a full refund, or shipping on returns is not free on sale purchases.

5. Gift Returners

A fifth and final customer segment based on return habits includes those consumers who are returning gifts. A surge of these returns are likely to happen around major holidays or shopping events like Black Friday, Christmas or Valentine’s Day. Reasons for a consumer to return a gift might be a mix of the following:

  • Wrong size was chosen
  • Recipient did not like gift
  • Would have rather received a different product

Even if one of your products is being returned due to a gift exchange, these types of returns are still opportunities to provide good customer service to build brand loyalty.

How to Deal with Gift-Returners

 A good way to create a relationship to those who are returning gifts is to have customer service representatives be easily accessible and to provide the shoppers with options to move forward with the exchange. Giving the gift recipient the option to either get cash back or store credit allows them to have freedom in the buying process. By doing so, it is easier to ensure they are getting the product they want and will be satisfied in the long run. Catering to this segment’s needs is especially important if it is the customer’s first time shopping at your business. This is a great opportunity to build a first impression based off of your customer’s interaction with your business’s retail experience.

Conclusions

No matter the circumstance in which an item is being returned, the same main principle remains true – good customer service is the key to profitability regarding return policies. No matter which avenue your business takes, it is important to make sure that people can be helped with friendly service.

To summarize, there are five main customer segments based on return habits. First, there are generally dissatisfied customers who are unhappy with their purchases. These consumers can be helped by displaying a clear return policy, as well as easily accessible customer service help. Second, trend victims are those who buy merchandise to wear it once and return it shortly after. A way to deal with these customers is to request that they give detailed information as to why they are requesting a return before allowing them to receive a shipping label. Third, there are size questioners who buy multiple of the same item in order to determine the best fit for them of a style. To combat this type of return, you can visually depict each product with different size models wearing the merchandise as well as encouraging previous purchasers to post reviews on your website regarding size and fit. Fourth, there are those shoppers that are sale seekers. These shoppers take advantages of lower prices to later return items. If this is the most common return for your business, modify your return policy during sale periods. Finally, gift-returners are those who are return presents received from your company. These consumers may be first time shoppers, so it is important to still build a relationship with them. To do so, give them options as to how they would like to move forward with their exchange.

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5 Ways to Boost Profitability by Segmenting Customer’s Return Habits Returns are an essential part of running a successful e-commerce platform, they can be an asset or a liability if not well understood.
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Sources and Further Research

Virginia Bingol

Virginia Bingol

Virginia Bingol is from a small town outside of Philadelphia, Pennsylvania called Kennett Square. Currently, she is a junior at the University of Pittsburgh pursing an undergraduate degree in Marketing and Supply Chain Management, as well as a minor in Studio Arts. She is excited for the opportunity to share her passion for the fashion industry in her role as a Content Specialist at 440 Industries.

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