The Critical Role of Returns in Retail: Enhancing Retention and Reconversion

Written by John-David Klausner, Vice President of Business Development, Loop

In today’s challenging retail landscape, retaining long-term customers continues to be a core factor driving retailers to become more resilient. Through retention and reconversion, retailers can remain competitive by innovating and streamlining an often overlooked aspect of their operations: their returns processes. 

Loop's latest report, The 2024 State of Returns Report, highlights key consumer trends and ways in which retailers embark on the road to retention and reconversion; offering insight into the shifting dynamics in consumer behavior and the crucial role of returns.

The Shifting Consumer Mindset

The current economic landscape of 2024 is characterised by heightened consumer vigilance and a focus on value as cost-of-living pressures continue to batter consumers. The latest ABS data shows non-essential spending has dipped by 1.9 per cent, while essential spending has surged by 1.8 per cent year-on-year. 

This shift, coupled with inflation rates peaking at 7.0 per cent in the first quarter, and subsequently dropping to 4.1 per cent by the year's end, has led consumers to be more strategic with their spending. Shoppers are also increasingly consolidating their spending around peak sales periods, such as Black Friday, Cyber Monday and Amazon Prime Day.

This strategic behavior has a direct impact on return rates. Retailers must brace for higher return volumes in the months following major sales events. Although return rates have stabilised over the past year, seasonal surges are expected, driven by savvy shoppers engaging in practices like bracketing; purchasing multiple sizes or styles with the intention of returning those that do not fit or meet expectations.

 Key Drivers of a Smoother Returns Experience

A seamless returns process is paramount in fostering customer loyalty. Explained in The State of Returns Report, the three pillars of an excellent returns experience are free return shipping, easy and intuitive processes, and fast refunds or immediate exchanges. Retailers who excel in these areas not only alleviate the operational burden on customer service teams but also enhance the post-purchase experience and promote loyalty.

Returns significantly impact customer loyalty and revenue. Loop's report shows that 75 per cent of shoppers won’t repurchase after a bad returns experience. In comparison, repeat customers, who make up only 21 per cent of shoppers, account for 44 per cent of total revenue. 

Leveraging Returns for Reconversion

Retailers can use the returns process to drive reconversion by offering incentives like store credits or easy exchanges, which encourage customers to make additional purchases instead of seeking refunds. Reconversion, the process of turning a return into a new sale, can significantly increase customer retention and overall sales. Innovations like Loop Instant Exchange, which allows customers to get their exchange items before returning the original purchase, simplify the process and secure sales. Omnichannel shopping, where customers engage both online and in-store, offers additional opportunities to increase CLV (Customer Lifetime Value) and purchase frequency.

Efficient, customer-centric returns processes are crucial in today's retail environment. By prioritising seamless returns, and innovating with better returns solutions, retailers can turn a potential pain point into a strategic advantage. When looking to drive retention and reconversion, investing in the right technologies for retail returns will get you there.