Planning for DTC business success and managing e-commerce returns effectively

Larger brands have the luxury of providing longer return periods that range from 30-60 days to their customers. However, for smaller brands, it is not the same.

D2C, e-commerce, online shopping, returns, logistics, startup, investment, product description, apparel
Cropped image of woman inputting card information and key on phone or laptop while shopping online.

By Akash Gehani

Industry reports indicate that the rate of e-commerce returns in India is expected to be at 25-40 per cent. As the market gets more crowded and consumers have a variety of options, some of the essential statistics to know when drafting up the refund and return policy at a company include the impact of mismanagement of returns on profit, products with a high return rate and the growth of the reverse logistics business.

The 3 most important facts to know regarding e-commerce returns in India:

1. Profits can reduce significantly if the returns are not managed efficiently:

Smaller DTC brands have not yet commenced taking note of the invisible costs that are generated because of a high rate of returns.

Larger brands have the luxury of providing longer return periods that range from 30-60 days to their customers. However, for smaller brands, it is not the same, it becomes difficult to track and account for the returned goods and the costs associated with them.

These invisible costs keep eroding your company’s bottom line and in return give lesser profits. This can be as much as a 25 per cent reduction as indicated by market studies.

Some of the costs involved when returning a product: –

  • Logistics cost: These costs include charges for return shipping, warehouse, restocking and reshelving charges.
  • Damaged goods: Damaged goods cannot be resold hence the DTC brand would need to take them away.
  • Faulty products: Can be repaired, but the repairs need additional charges for them.
  • Reselling the product: For this one needs to restock it, repackage and refurbish to resell it as an “as good as new” product.

2. Apparel is the highest return product:

Reports indicate that almost 20 per cent of consumers buy apparel in different sizes, shapes and fits, with the sole intention of choosing their best fit and returning the others and not taking this into account can severely impact a business’s cash flow.

Clothes are also a challenge for a lot of impulsive buying. Website visitors might often find themselves buying for themselves, but then they end up wanting to return it the next day. DTC brands that sell and promote clothes online need to factor in a high return rate, especially during festive seasons.

After apparel, shoes and electronics are the next leading products with high return rates.

3. Reverse logistics businesses are on the rise

As consumer focus grows, customers become more picky and choosy about what they want. Industry studies suggest 92 per cent of people only buy a product because of its easy and hassle-free return policies.

The scope of easy and fast returns right from the doorstep has increased the return rate in countries like India. Another factor that has contributed to this is that India is one of the few countries that encompass free shipping services in their delivery and return policies.

In India, the reverse logistics business saw growth at a CAGR of 10 per cent (2021). The rise of e-commerce in tier-II cities and beyond and the consequent rise of return rates have been contributing to the rise of the return logistics business.

The 3 most important ways to reduce e-commerce returns in India:

1. Clear product descriptions

The customer should get as much information as possible simply by seeing the product description. More than the title, the description should inform the customer about important things like:

  • Size and dimensions of the product
  • Use cases of the product
  • Materials used
  • Extra care tips, if any
  • How safe is the product

2. The picture quality of the product should be of high quality and unedited

Indian customers have set high standards when it comes to the product they order online. Extremely high return rates have been seen with low product qualities or products that look different than what was promised.

Since the customers cannot see the product with their own eyes, they have to solely rely on the images/video that has been provided.

3. Return policies should be transparent

Online stores must have a clear transparent return policy as stated. As an online seller, one has the complete right to not alternate, refund or resend a product if the seller had mentioned the terms and conditions of the return on the product landing page.

It additionally helps the customer decide whether they want to purchase that product or not based on the return policy. One might end up losing out on revenue if the customer doesn’t purchase the product.

However, in the long run, it is saving up on costs that are incurred when handling product returns.

An informative, transparent and detailed return policy helps to get more intentional sales on online stores while also decreasing the return rate significantly.

(Akash Gehani is the co-founder and COO of Instamojo)

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First published on: 20-05-2022 at 16:03 IST