Al Gerrie, CEO of returns provider ZigZag, and Agop Ashjian, CEO of post-purchase company Shipup, discuss how returns and post-purchase solution dynamics shaped the industry in 2023 – plus where they see these heading in the not-so-distant future.
A year is a long time in retail, but looking back to January 2023 there have been a number of changes to how shoppers interact with retailers. Several lessons can be learned from 2023 in terms of how to approach returns and post-purchase solutions in 2024. Consumers are leaning into the options available to them and expect a higher standard, especially when economic pressures are making them more attentive to budgets and who they choose to shop with.
Maximizing value
“Choice and flexibility in returns options have been the average consumer’s clear preference in 2023, and one that they are willing to put money on the table for,” comments Al Gerrie, CEO of ZigZag (below right).
“As ever, to drive sales and customer loyalty, it’s on retailers to meet this demand and keep their customers happy. We found that 43% of all returns made across Black Friday and Cyber Monday were paid for, demonstrating that shoppers will spend a little extra to feel the benefits of flexible returns options. In 2024, we may well see retailers continue to use free returns as a promotional tool during specific key trading periods, but it’s likely more retailers will follow the paid-for trend for standard returns as the year progresses.”
According to ZigZag’s data, home collections and locker drop-offs have skyrocketed in popularity over the past 12 months, and the returns landscape will become much more diverse. Black Friday locker drop-offs were up 76% compared to 2022 for the returns company and now represent 16% of all returns on its platform. Shoppers have reportedly matched the UK’s expansion of locker drop-off locations with an eagerness to utilize them as a convenient returns method.
“This is not to say postal operators have stopped being the main choice, just that their market share is now being challenged by other returns methods,” continues Gerrie. “This in turn has encouraged postal services to offer even more flexibility as they increasingly provide options like home collection. Be it collection or store drop-off, free or paid, refund to a gift card or for a replacement item to be sent; what shoppers really want is freedom of choice. Each method has its own conveniences and merits, so shoppers are most happy when they know they can opt for, say, collection on the days they are working from home and local drop-off options when they are out and about.”
The ZigZag executive points out that tighter budgets also mean customers are becoming more careful about what they keep to make sure they don’t waste their money – they’re spending less but returning slightly more. Gerrie stresses that Black Friday was a clear indicator that shoppers have less money to spend in 2024 and, until the market sees interest rates improve, consumers will continue to feel the pinch. He also underlines that, for retailers, this has an effect on the speed with which returns need to be processed as products need to be back in the supply chain as quickly as possible to maximize the value from stock.
Gerrie says, “Sourcing inventories from closer to home in Europe to save import costs means retailers don’t have to buy months’ worth of stock at once, but does mean the stock can’t be wasted. Customers’ diligence over purchase choices has the same effect. Returns increasing despite declining sales makes the process more important to customer retention, so speedy refunds and quick turnarounds will continue on the path to becoming a core objective for retailers. Local grading will also become vital to assist retailers to turnaround stock quickly.”
Customer technology
In the context of these insights, Shipup also found that the increasingly important role of emerging technology aided retail and logistics companies to accommodate customers’ rising expectations and limited spending.
“Much as they have in returns, expectations around post-purchase experiences have shifted during a rollercoaster year for economics and technology in retail,” highlights Agop Ashjian, CEO of Shipup. “2023 has been the year of rapid developments in AI and this has also been echoed in post-purchase trends. AI algorithms have refined the analysis of customer data to offer more personalized customer communication, which has only served to increase the relevance of recommendations, enhancing customer satisfaction and boosting sales. Consumers now expect a much more personalized online shopping experience without friction, with new product recommendations based on preferences, behavior and past purchase history.
“These stricter expectations are balanced by the tools retailers now have available to enhance the customer experience. For instance, being able to give instant feedback 24/7, through chatbots, eases the workloads of customer support teams and generates data-driven insights that can be channeled to bring more efficiency to businesses. We expect that more retailers will meet the demand for immaculate customer service by incorporating automation and AI into logistics and supply chain management, leading to faster delivery options.”
He continues, “This being said, economic worries have had a knock-on impact for consumer expectations of the post-purchase experience too, so it has been a crucial year to get this process right given struggles with delays for UK carriers and postal operators. In 2023, consumers prioritized price over convenience when considering delivery options as they understandably look to cut costs – choosing free delivery with a longer wait time is often an easy decision to make in this situation. Our data shows that 93% of consumers faced a delivery issue in the past year, putting added pressure on retailers to ensure a smooth and proactive customer service experience with regular communications and full disclosure on any problems between the depot and the doorstep. Even if delays occur, 43% of shoppers can be persuaded to buy again with proactive customer service.”
In conclusion, the executive found that busier sales events like Black Friday are a more challenging sell when consumers have less disposable income to indulge with, so customer retention will gradually become more of a priority than customer acquisition in these periods. Ashjian asserts that post-purchase technologies will be crucial here, as customers are increasingly frustrated with the cold, transactional relationship conveyed by a poor experience.
For more of the top insights into the future of returns, read Parcel and Postal Technology International’s exclusive feature “Have we begun to see a fundamental and more sustainable shift in the returns landscape?”, here.