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US consumers were predicted to return $100 billion worth of unwanted products purchased between Thanksgiving and Christmas. Those are some painful numbers. As exciting as the holiday season is for retailers, returns and refund requests pose a major problem.

Buyer’s remorse is a common phenomenon. Some purchases are impulse decisions, and the customer may not feel it fits their taste or style after getting the product home. Even well-meaning gifts from loved ones end up being returned to the store.

Even though returns and exchanges are great for the customer, they are terrible for retailers. It is estimated that around $428 billion worth of merchandise was returned in 2020. It accounts for more than 10% of the total sales. It is even worse during the holiday season, as an estimated two-thirds of the products are returned.

Customers think that returned products are easier to resell. The truth is that most of them end up in landfills. Gift cards can reduce the burden on retailers by a huge margin. As the holidays inch closer, retailers should be even more careful and have a streamlined process for returns, refunds, and exchanges. Your main objective should be to keep the customers asking for returns from going elsewhere.

What is the problem with online returns?

The biggest problem with retail returns is that most of them never go back on sale. Why? Because it is easier for businesses to throw them away than try to resell them. The sad part is that only 20% of the returned products are defective. Most retailers don’t have the technology, infrastructure, or know-how to resell goods returned to them.

According to several industry experts, retailers lose a third of their revenue because of returns. Online purchases are almost three times more likely to be returned than products from physical stores. If you sell clothes, returns are even higher as customers find it difficult to guess the right size, color, and fit.

Businesses also have to allocate extra physical space to store returned items. It also takes up the time of the retail store staff to process returns. Even a small reduction in the return rates will have a huge impact on the bottom line.

How can retailers improve returns management?

Returns and refund requests have a bad impact on retailers. It is a headache throughout the year and even during the holiday season. Let’s look at how retailers can implement a few strategies to address this problem.

  • Understand the true costs associated with returns and the potential opportunities that are there to reduce the costs.
  • Create an effective omnichannel organization to streamline operations.
  • Simplify and integrate IT systems to manage the impact of returns.
  • Provide gift cards instead of refunding the money in cash.

Here’s how you can use gift cards as an alternative for refunds, returns, and exchanges:

There is no doubt that the average customer is going to want refunds in cash. It means they will either shop somewhere else, or, if you are lucky, at your store. You cannot depend on the latter turning out to be true.

  1. Provide extra:
  2. If a customer asks for a refund and wants the money to be sent back as a gift card, you can add a sweet extra to its value. Let’s assume the product is $100; you can give them back a $110 gift card. It keeps everyone happy. It is a cool $10 discount to your customer for doing nothing. You will also get to keep the customer and their business.

  3. Add them to an exclusive club:
  4. If you have an exclusive club or a program where elite customers get freebies, you can use this to convince them to get a refund in the form of a gift card. Ensure that the prospect of being added to an exclusive club comes with perks. Otherwise, you will end up having a disgruntled customer.

    Imagine if the only perks are getting points for each purchase which cannot be redeemed in any form but are just for vanity purposes. Believe us when we say this, there are businesses that come up with such ideas.

  5. Convince them to keep the product with a gift card:
  6. There are times when the customer is still dilly-dallying about the decision to return the product. You can use this opportunity to convince the customer that if they keep the product, you will give them a brand-new gift card for a certain amount. Customers who weren’t sure about returning have nothing to lose. They also get to make a cool profit. Make sure you don’t publicize this policy too much. It might result in several customers who walk in with empty threats of returns, just to get your gift card offer.

  7. Incentivize your staff:
  8. Even if the leadership team’s heart is in the right place when they come up with policies, the same should reflect in the employees. One way to push gift cards for exchanges is to offer incentives for the employees too. Since it takes up a little more time, employees would rather talk to buying customers. Therefore, they would want to end the transaction with the customer who wants a refund as soon as possible.

    Giving them a cash reward or any other incentive to push gift cards for returns is a great way to ensure that your customers stay with you.

  9. Offer a variety of perks:
  10. Every customer who wants to return the product they brought from your store represents a loss to you in terms of time and effort wasted, not to mention the money that goes down the drain, as most returned products cannot be resold. As a last resort, you can ensure that at least their paid money will be spent at your store again. Come up with perks that you think your customers would love and offer to those who ask for refunds.

Wrapping up:

Returns are one of the biggest problems that retailers face. With shopping becoming incredibly easy, that too with the few clicks of a button, returns have become easier too. Most customers don’t understand the kind of hassle that returns pose to retailers. Unfortunately, making returns restrictive can also be bad for the brand. This is where offering gift cards as an alternative for refunds makes immense business sense. It helps the retailer keep the customer’s business.

If you are looking to add gift cards to your repertoire, yesterday was the right time. Fret not; the team at 99minds is here to help you get ready to handle returns and refund requests the right way.

Pravin Kamble

Principal of 99Minds.io, an AI-based all-in-one promotion & loyalty platform designed for businesses.Interested in AI & Data Science.

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