Here's an in-depth look at how blocking just 0.8% of customers for purchases resulted in a 16% drop in return costs
1. Identify problem customers
In any business, there are always a few customers you might rather lose than win. Although the vast majority of customers are genuine shoppers, a small proportion may return too often, resulting in escalating costs. It is well worth identifying these "Serial returners" and adapting your strategy to their behavior. With Returnista, you can quickly identify which customers are costing you money instead of generating revenue.
2. Understanding the impact of returns
The superficial cost of a return may seem to be only about refunding the customer and logistics costs, but in reality it involves much more than that. The following is a breakdown of different types of costs:
- Processing returns: Every return involves several steps: receiving the item, inspecting it, updating inventory records and processing refunds. These steps require manpower and time, which translates into costs.
- Restocking costs: although not every product can be immediately restocked, this is true of most products. This involves restocking costs
-Storage costs: Space is money. Returned products sometimes take up storage space for an extended period of time pending inspection or repackaging.
- Potential product loss: Not all returned products can be resold. Some products may be damaged or their packaging may be damaged, making them unsaleable. This results in immediate product loss.
- Shipping and Handling: Depending on your return policy, you may have to pay shipping costs for returned items. Even if customers pay for return shipping, there are still processing and possible repackaging costs.
- Missed sales opportunities: If a product is frequently returned and out of stock, other genuine buyers miss opportunities. This leads to missed sales opportunities and potentially drives customers to competitors.
3. A strategic move: quality over quantity
After studying the serial returners, the company realized that just under 0.8% of customers were responsible for a large portion of these costs. The decision to block these specific customers was focused on long-term savings and efficiency.
4. Results in figures: A 16% decrease in return cost
By focusing on this small portion and understanding the deep impact of returns, the company saw a significant 16% decrease in return-related costs.
5. Lessons and actionable insights
Actionable Takeaway: Dive into your data. Understand the true cost behind each return. If a specific customer segment consistently causes high return costs, consider strategies to effectively reduce it.
Want to block certain customers? You can do that here in Shopify
In e-commerce, understanding the intricate details can help improve processes, cut costs and provide a better shopping experience for the majority.
Wondering what part of your customer base drives up total return costs? Get in touch