Recent reports that followed earnings calls from several large retailers–including but not limited to Gap, American Eagle Outfitters, Target, and Walmart–suggested they’ll offer a simple solution to combat excess inventory: refund customers for items they want to return, and let them keep the items, too.
It’s called returnless refunds, and while some e-commerce trailblazers have been implementing it for a few years now, the supply chain panic-driven surplus of certain items is propelling some of the biggest store chains to follow suit. A new study, from my company, Dotcom Distribution, of 1,150 consumers across the U.S. reveals this tactic often causes a halo effect resulting in positive brand sentiment and return customers. But you don’t have to be a big box retailer to execute or benefit from this strategy.
Letting customers hang on to returns is making them–well–return.
Sending a customer an email saying, “feel free to keep or donate the item you were planning to return,” scores major points for customer experience and satisfaction. According to the study, more than half of consumers (51 percent) said the experience of a returnless refund made them want to purchase from a brand again. That’s a remarkable statistic on its own, but here’s what really puts it into perspective: in 2021, that number was just 40 percent.
Perhaps it’s the excitement and gratitude around getting something for free or relief in not having to physically ship something back. Whatever it is, consumers are paying the positivity forward, as evidenced by the 34 percent of respondents who said getting a returnless refund makes them want to donate unwanted items–again, an 11 percent increase since last year.
Sacrificing products can sometimes save money.
Fully refunding a customer for a return without requiring them to actually return the item might sound like money out the door, but depending on the item and the circumstances, the opposite can be true.
Offering return-less refunds is not an option for every company and the efficacy varies based on the product and why it’s being returned. But when it does work out, returnless refunds check off several boxes on the seller side. Taking into consideration costs associated with return shipping, labor for restocking, and refurbishment or destruction, the amount of money usurped by a single return can easily end up being more than the product is worth.
A positive environmental impact positively impacts brand affinity.
Samantha Mansfield, head of strategy at global customer experience and commerce agency LiveArea EMEA, shared with Retail Gazette that her company’s research found that 71 percent of consumers would change their online shopping habits if they knew returned items would go to landfill or be destroyed. She went on to emphasize how influential a company’s ethics have become in consumers’ purchase decisions, as well as how important it is for brands to be transparent about how they are working to behave more sustainably.
By eliminating returns, you’re also reducing your company’s carbon footprint. This is not lost on consumers, and in fact, it’s an issue that’s rising in importance on customers’ scale of values. In 2021, 27 percent of the e-commerce study participants said being offered a returnless refund made them feel like the brand cares about the environment. That number grew to 33 percent in 2022.
Leveraging purchase history may help predict response.
The types of purchases a consumer makes appear to play a clear role in how they feel about returnless refunds. According to Dotcom’s study, 61 percent of consumers who reported purchasing sporting goods and toys, respectively, led the pack of those who agreed, experiencing a returnless refund made them want to shop with a brand again.
Consumers who reported purchasing beauty products were the largest group to report that receiving a returnless refund made them want to donate unwanted items (42 percent). And consumers who purchased sporting goods and beauty products equally felt that when a brand offered them returnless refunds, it signified they care about the environment (40 percent each).
Inventory planning can be really hard to get right, and when you get it wrong, it’s easy to panic and make mistakes. Returnless refunds are a modern answer to an age-old problem. It’s worth exploring how it might fit into your reverse logistics strategy–if it works, saying goodbyes to products might mean saying “welcome back” to customers.