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Klarna Research Reveals Impact of Free and Easy Returns On Customer Loyalty

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Retailers who don’t offer an easy returns process are losing sales and customer loyalty, with 84% of shoppers saying they won’t come back to a brand if they have a poor returns experience.

The research conducted by Klarna across 2,000 UK consumers in 2019 – and compared with the same data points from 2017 research – reveals the rapid normalisation of returns over the last two years. The majority of consumers (82%) say returns are now a normal part of online shopping, and with online sales hitting a high of 20% of all retail sales in December 2018*, this growth in returns can’t be ignored.  

Returning returners: harnessing the loyalty bounce

Done right, returns can be a driver of loyalty and increased customer lifetime value, and retailers who don’t embrace the rise in returns culture could see customers snapped up by more dynamic competitors:

  • Three quarters (75%) say easy returns are an essential factor in their choice of retailer
  • Over three quarters (78%) said free returns mean they would buy more with a retailer over time
  • 86% say the option of free returns will make them loyal and more likely to keep coming back to a brand

Retailers offering flexible returns and payment options are more likely to steal a march on competitors: 84% of shoppers want to be able to choose whether to return an item in-store or via post or pickup, and a third (31%) would be more likely to buy something online if they had the opportunity to pay for it after trying it at home.

From URL to IRL: false expectations and the reality check effect

The volume of online items being returned has climbed 14% in two years and this rise is being exacerbated by a growing gap between what customers see online and the reality of what they receive in real life:

  • Consumers returning faulty items has more than doubled between 2017 and 2019 (12% to 26%), and nearly quadrupled for items in cases where the quality didn’t meet expectations (from 6% – 22%)
  • Nearly a third of shoppers (27%) return items because the fit isn’t right and returning items because the product looks different online than in reality has more than doubled since 2017 (8% to 19%)

The findings indicate that if retailers want to reduce their online returns, they should look to improve their online product representations with 81% of shoppers saying that better photos and descriptions would help reduce the ‘false expectations effect’ and consequently the amount they return.  

Luke Griffiths, UK General Manager, Klarna, said: “It’s no secret that for retailers, returns can be difficult to manage and there is a common misconception that they’re bad for business. But retailers who aren’t prioritising their returns processes are damaging their business – losing sales, and eroding customer loyalty.

By embracing returns as a competitive differentiator, online retailers can stand out from the crowd with “pay after delivery’ — allowing their customers to turn their sitting room into a fitting room. Over a quarter of respondents (26%) said this would make them trust a retailer more and 63% said it would encourage them to keep more items, helping build a relationship with customers and secure long-term loyalty.”

Paul Masters, COO of InTheStyle said: “Many of our customers are frequent buyers and like to experiment with different looks and sizes at home, particularly with our new collections. So, as with all e-comm fashion businesses, we’ve built returns into our core business model.

And to give our customers the flexibility and freedom to try pieces from our latest collections before committing to a purchase – just like you would in store — we introduced Pay later. Any concerns we had about the rise in returns this would create have been offset by an increase in purchase frequency, basket values and customer loyalty.

Our customers are buying more, trying more and loving even more. And as a result we’ve seen a 31% increase in average order value when shoppers use Pay later and a massive 47% increase in order frequency compared to other payment methods. In a competitive market it’s not only helping us drive sales from our existing client base, it’s become a powerful acquisition tool for converting new shoppers.”

Tim Robinson, Doddle CEO said: “Returns are a huge headache for retailers but they’re not going away.  For many online shoppers, they’re a right and necessity – the online equivalent of the pile of clothes you used to hand back to the shopping room assistant in store.

As a retailer, once you take this as the context, the focus changes. Returns become just another cost in the online supply chain, like packaging or shipping costs, and rather than being a problem that needs to be solved the focus turns to optimisation and efficiency.”

Source : Insight DIY Team and Klarna

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15 March 2019

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