Do You Know BORIS? Getting Buy Online, Return In-Store Right.
One of the biggest issues retailers have always faced is how to wrestle with the beast known as shrink, aka return or exchange items. Online shopping adds a new wrinkle for shrink management: how exactly should retailers handle the load when customers Buy Online, Return in Store (aka BORIS)? According to David Sobie, CEO and Founder of Happy Returns, as much as 15 to 40% of online purchases are returned in store. In terms of revenue, returning online purchases are projected to cost retailers over a trillion dollars a year soon. To understand why returns continue to be such an expense, you need to start with one of the legendary stories in retail history—which is still relevant right now in 2021. It’s a story about the importance of customer service and the power of customer satisfaction.
Back in the 1960s, a man walks into a Fairbanks, Alaska Nordstrom department store to return two snow tires. The only problem? Nordstrom doesn’t sell snow tires. However, this particular Nordstrom store used to house the Northern Commercial Company, which is where this man says he bought his tires. The salesman gave the man $25 for his tires, thanked him for coming in, and invited him back any time.
Is the story true? Nobody knows for sure. But it’s become one of the all-time great retail legends, and demonstrates the power of a generous return policy on customer satisfaction.
As Gerry Marrone, SPAR’s Chief Revenue Officer sees it, managing BORIS is a huge challenge to retailers, one they simply need to get right.
As online sales have surged via COVID there is no doubt that returns management becomes an even greater issue for retailers. In our Assembly business, where we work with Ready-to-Assemble furniture, 80% of customer returns are driven by poor DIY assembly. So now the retailer not only has to process a return, they have received unsellable merchandise back.
How can retailers adapt to this new Buy Online, Return in Store era? What are some of the best practices to monetize BORIS? In the midst of all these returns and exchanges, what are the opportunities for retailers? Let’s take a look.
We Don’t Want It Back
You don’t need to be an economist to see how giving customers their money back while allowing them to keep the product is not a sustainable business model. Yet for giants like Walmart and Amazon, sometimes processing and shipping back an online purchase is simply not worth the expense. For them, processing returns or exchanges is cost prohibitive.
For the rest of us, that’s probably not an option. But finding ways to minimize the costs of Buy Online, Return in Store becomes more and more critical. One example of a retailer who seems to be on to something is Kohl’s. Their policy of accepting and shipping Amazon returns in-store has been beneficial in terms of driving traffic. In a pilot test program in 100 midwestern Kohl’s stores, they saw a year-over-year revenue gain of 8% compared with other Kohl’s stores. They also saw a 9% increase in new customers compared with other Kohl’s locations.
A big part of this revenue jump is the 25% off limited-time coupon that customers receive when returning items at Kohl’s. When you think about it, it’s a brilliant idea. Customers who likely weren’t planning on buying anything suddenly have a huge incentive to spend—and spend quickly. It’s a huge way of making Buy Online, Return in Store work better for retailers. And it gives customers a great shopping experience, which means these customers are far more likely to become return customers. Which leads us to our next topic.
Managing Shrink: Let the Data Be Your Guide
In the BORIS era, few things are more important to retailers’ bottom lines than the ability to handle returns. Effective shrink management can quickly destroy a store’s numbers. Especially when customers are coming in with online purchases they didn’t even buy from your store. How can that be managed? The answer is through your data.
One of the key rules for effective retail data management is don’t try to develop it in-house. That may not be your team’s specialty. You could end up spending millions on a solution that doesn’t work. It’s best to leave that to the specialists—of which there are many.
A far less high-tech key to managing returns well is merchandising. You’ll notice that the Amazon Returns section at Kohl’s is all the way in the back of the store. That’s not an accident. It’s smart merchandising. The idea is to make sure customers walk through the entire store, in the hopes that they’ll see something they’re interested in. Then, when they get their coupon, they will be more inclined to buy.
Merchandising is where we at SPAR come in. Are you considering the customer’s Path to Purchase when planning for returns? Have you considered merchandising the space around the return counter into something resembling a sales counter? Is there an incentive to be had for the shopper to “exchange” instead of returning? Without a sound strategy around returns, management retailers are missing a critical opportunity to increase basket size rather than losing a sale.
Repackaging Becomes Essential
What happens for retailers who aren’t the size of Walmart, Amazon or Kohl’s? How do you handle Buy Online, Return in Store without decimating your bottom line? A great customer experience is crucial, but recent store closings at Nordstrom serve as a painful reminder that refunding tires is not always enough.
This is where repackaging comes in. In the BORIS era, many shoppers return items that have nothing wrong with them—yet that doesn’t stop the customers from destroying the packaging, making resell a near impossibility. If this sounds familiar, SPAR is uniquely qualified to help.
Our repackaging services are designed to address this problem for retailers everywhere. Working with the retailer and manufacturer, we can develop a smart and effective repackaging strategy that focuses on the preservation of revenue and growth. You can learn more about SPAR repackaging services here.
Have you had any recent bad or good experiences returning an item? Seen anything particularly innovative coming from a retail store in terms of customer exchanges? Let us know. We want to hear from you.