You Are Losing More Through Product Returns Than You Think

Posted By: editor
Posted On: 21 Feb 2020

Returns are an integral part of any e-commerce business. E-commerce has boomed mainly because of the convenience that customers get of being able to buy products and services from their homes or offices. But this has a flip side, the customer without physically inspecting the product or trying out the service cannot be sure whether to make the purchase or not. This is why E-commerce companies have resorted to trial periods and returns of physical items. The idea behind this was to ensure customer satisfaction. Return policies made were inclined towards looking at the benefits of the customers and not the sellers. But with time customers have in a lot of cases abused the loopholes and the benefits of easy return policies of sellers leading to sellers losing on a lot of revenue. 

Recent data shows that about 12% of the products sold are returned. This rate varies according to the product categories, for example, 12-18% in casual apparel, 15-20% in electronic goods and around 35% in high fashion apparel. So clearly returns account for quite a substantial amount of a seller’s revenue.

Product Returns in Ecommerce

Any instance whereas a seller you need to refund money received to a customer at any point after the sale has happened can be termed as a return. When a product is returned or exchanged, the retailer experience incremental supply chain costs. The item might not be resold at the original price due to damage, wear and tear, or devaluation specifically for fashion or seasonal merchandise. 

Calculating Costs involved in Product Returns

The average revenue produced by an Ecommerce retailer will be:

Net Revenue = Total Sale — Overall Cost incurred

However, when the product returns get involved, there will be several visible as well as hidden costs which are listed as the following:

  • Logistical costs involved in pickup and return both ways
  • Payment gateway charges incurred in crediting the return
  • Capital which could have been utilised gets stuck
  • Products returned could have been sold elsewhere
  • Warehousing costs involved in stocking the returned items
  • Costs of cleaning, restoring products after the return will be there
  • Costs of re-packaging are also to be considered
  • Costs of Re-marketing the product
  • Costs of workforce to handle the returned items
  • Costs of Return management tools used

Daton Can Help You Strategise Your Product Returns

If you own an e-commerce business or are a seller on any of the popular platforms, then the return policies are something you should carefully pay attention. As an online retailer, having an efficient return process is vital for you. Strategise an excellent reverse logistics policy to maximise customer loyalty and increase your company profitability. As discussed in this article there are a lot of variables involved in return management, and if not done right then as a seller you stand to lose out on a sizeable chunk of your revenue this way. Managing so many variables for hundreds of products manually cannot be done efficiently on a scale. Hence it is essential to use a return management tool for this which would automate the process. This tool ideally would require data from various sources like your website, e-commerce platform, payment gateway, logistic partner etc. to function correctly. 

Daton, is an effective data pipeline that seamlessly extracts Data from various popular data sources like Facebook ads, Shopify, Google Ads, Magento, many more. This highly automated pipeline will fetch all the above mentioned data and store in the data warehouse of your choice without the need for any coding from your end. Analyse Useful information from the warehouse and strategise your return policies better.

As an online retailer, having an efficient return process is vital for you. Strategise a good return policy to maximise customer loyalty and overall profitability through Daton. Click Here to set up Daton now.

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