A recent study has found that product returns can actually make you money and that some e-retailers actually want to have a certain product return rate per customer to increase future spending. But some companies consider product returns as a loss to the company. Product returns cost manufacturers and retailers more than $100 billion per year or an average loss per company of about 3.8% profit. It’s a bitter experience for them.
Here is an example of online shoe retailers Zalando and Zappos adopting product returns policy. Zalando and Zappos have offered product returns for customers to increase more spending in future. Non-availability of the same might be a loss. Say, if a customer has purchased a product online and that product turns out to be defective, he is more likely to return the product if he has the option to return without any charge. But if he doesn’t have that option available, he will definitely be offended and make sure not to purchase from that site anymore. This will degenerate company-customer relationship.
Based on the research work from different sources, I have mentioned some points which might help you to gather some ideas about product returns and reach a conclusion.
What are the consequences of product returns?
There are some companies that shy away to send catalogues to customers who have returned their products. The worst would be not being able to maintain the company-customer relationship. Companies should send emails even on return to keep in touch with them. To maintain a healthy relationship with the customer’s, catalogue mail should be sent to the customers even on purchase or return of the product. It has been found that customers who return more products tend to purchase more in future and it also helps the managers to determine the resource allocation strategies.
How to make the profit from product returns?
Take for example a customer is frequently returning products, managers can decrease the rate of return by giving offers and discounts to customers related to similar products. When a customer returns a product for the first time, send him emails with offers and discounts on similar products. With the discount, he is definitely going to purchase a similar product with a much higher price. However, you should know the similar categories which are intended to be purchased by the customer. This calls for profit from product returns.
The cost and benefits of product returns
Until managers can’t determine the percentage of product returns, they can’t prepare the resource allocation strategies. Product returns are obviously a loss for the company if they are not able to convert it into profit. Say, for example, If a company has 40% customers who are not returning their products and rest 30% who are returning their products. The company should concentrate on those 40% customers to resell their returned products. These customers are more likely to increase profit.
Well, profit and loss of product returns varies from company to company. However, if you have a proper product return policy you are likely to make the profit. Since this will allow customers to return any products at any time. Customers will be willing more to purchase other products and this in return will increase more revenue from sales.