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Return to Me: Your Product Returns Could Lead to Returning Customers

January brings with it a decline in sales and a spike in returns. But our research shows that having more of the latter can actually be a strong business KPI

The instinctive non-decision to include a “Return Note” when buying a gift for a loved one is a tiny moment of self-reflection. In your heart of hearts, you don’t want it to be used. You want your gift to be perfect. But you also want to allow the receiver to have what they desire,that whole “if you love someone, set them free” thing. Not to mention, the creepy thought of what would a return of your gift mean for your relationship.

Imagine our surprise when our research showed that for the brand-customer relationship, returns can do wonders.

The reason we’re bringing this up now is simple: January is the product-returns peak of the year. Right after the shopping extravaganza of November and December, which are traditionally the months with the highest sales of the year, comes January, in which people tend to return plenty of products. Returns include either items they received or purchased for themselves. The bump in returns begins in December but reaches its yearly peak in the first month of the calendar year.

Crunching some numbers from Optimove’s clients, the trends are clear.

And just as brands and marketers all over the world can’t hide their enthusiasm when they compare Q4 sales figures to other periods, we know all these refunds hurt a little.

We are here to give you the cure for this hangover and tell you that not only it’s predictable and natural, it can also be a very good business indicator, Customers who return items are much better customers, and are significantly more likely to buy from you again, compared to customers who didn’t return. It’s that simple. And unequivocal.

To compile the graph below, we looked at the number of customers who made a purchase. Then, we checked to see whether they made a return in the following 30 days or not – and put them in separate buckets. Finally, for every bucket, we looked whether they made another purchase in the following three months or not.

In simple terms, the retention rate of customers who made a return is significantly higher than those who did not.

Average Retention Rate of Customers

While the seasonal behavior is similar for both buckets, at every point in time, it’s evident that customers who did return a product were way more likely to purchase again, compared to customers who did not make a return.

And that’s not all. In addition to these customers being more loyal (as in buying again more frequently), they are also overall stronger customers:

  • The net order number of customers who made a return was 6% higher on average, compared to customers who did not return a product (the net order amount is the total order amount minus the refunded amount).
  • The net number of items these customers purchased was also higher – by 24% on average (neet number of items is the total number of items minus the number of returned items).
  • And finally, and most importantly – the future value of these customers was a whopping 64% higher on average.

While all of this may sound a bit surprising at first, on second thought, it makes perfect sense. The experience of returning a product is yet another touchpoint with the customer. And we all tend to remember and value experiences more than we do other things. Add to that the fact that customers tend to return more when the brand offers a hassle-free return experience, which makes them more likely to engage with and purchase from such brands, to begin with, and everything seems to be falling into place.

It’s not surprising, then, that 78% of shoppers will buy more in the long run if a retailer has free returns and 84% of shoppers saying they won’t come back to a brand if they have a poor returns experience. Additionally, 75% say easy returns are an essential factor in their choice of retailer, and even more (78%) said free returns mean they would buy more with a retailer over time.

The action item for marketers here is making itself very clear at this point: don’t be afraid of returns. Embrace them. Make it easy to return a product, consider try-first programs (31% say they would be more likely to buy online if given such an option). Take those “Free Returns” banners and slap them where customers can see them. Make sure to add “Return Notes“ to the package you’re sending. Only in this case, cross your fingers and hope they will use them.

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Shaked Mosseri

Shaked is a data Analyst, serving on Optimove's Strategic Services team. Shaked excels at identifying valuable trends and insights through the analysis of customer and campaign data for retail and gaming clients.