Retailers are under increasing pressure due to the costs associated with returnsbut they also discover ways to transform this challenge into a growth opportunity, Catherine DummittVice President of Marketing at Narvarsaid PYMNTS.

Balancing the cost of returns with the potential revenue requires a multi-faceted approach that combines optimized processes, advanced technology and strategic customer engagement.

A key strategy to reduce return costs is to optimize the returns checkout process, explained Dummitt, noting: “To maintain customer loyalty and encourage repeat purchases, it is critical to make returns as frictionless and consumer-friendly as possible. Implementing Options like In-store returns, return points and box- and label-free returns can significantly improve the customer experience.”

Retailers are also focusing on encouraging exchanges rather than refunds, Dummitt said, referring to Narvar’s Report on the status of returns 2024.

By combining expertise in e-commerce, supply chain management, customer care and machine learning, Narvar offers retailers a turnkey platform that to turn buyers into loyal advocates.

Since its founding in 2012, Narvar’s platform has enabled billions of interactions across every touchpoint – web, mobile, email, SMS, Facebook Messenger, Google Assistant and voice for customers like Neiman Marcus, Shiny, Everlane, Levi’s, SephoraAnd Box and barrel.

“Offering discounts or loyalty points can encourage customers to choose to exchange, which maintains sales and often leads to higher satisfaction,” Dummitt said.

Quickly reselling returned items is key, says Dummitt. Narvar’s report highlights that with streamlined return paths, returns can be processed and restocked 30% faster, ensuring items are sold again while still in season. Store credits and instant refunds encourage additional purchases by capitalizing on customers’ desire for instant access to their money.

Technology plays an important role in improving the returns process, Dummitt said, noting that using returns management platforms “automates the returns process and provides real-time updates, which can reduce operational costs and improve customer satisfaction. These platforms also analyze returns data to identify trends and areas for improvement, allowing retailers to refine their offering and reduce unnecessary returns.”

Another aspect of the process, according to Dummitt, is personalization, because “tailoring the return experience to customer segments can significantly impact customer retention and loyalty. For example, offering extended return periods to VIP customers can encourage repeat purchases and increase their lifetime value.”

Financial support buy online-return in-store (BORIS) options also reduce shipping costs and allow for faster restocking of returned items, leading to additional purchases in the store, Dummitt said.

Another important strategy is preventing returns before they happen, says Dummitt. “Accurate product descriptions and reliable delivery estimates can reduce return rates. According to Narvar’s report, 27% of returns are due to items not arriving on the estimated delivery date. Improving packaging is also important; 29% of returns are due to damaged items or missing parts. Proper packaging and quality control can reduce returns due to product damage.”

Retailers are improving their fraud prevention strategies by requiring photos of returned items and using account logins to verify returns, Dummitt said, noting 58% of fraudsters are deterred by photo requests and 51% by login requirements.

“To meet different consumer preferences, younger shoppers (18-29) prefer refunds and discounts, while middle-aged consumers (30-60) prefer convenience and speed, and older shoppers (60+) prefer traditional return methods,” Dummitt added.

“Looking ahead, retailers are focusing on convenient return options, sustainability and advanced fraud detection, and investing in AI (artificial intelligence) and automation to streamline returns management and increase customer satisfaction.”

For all PYMNTS retail reports, subscribe to the daily Retail Newsletter.