Electronics sales are predicted to rebound from a down 2020, with Statista estimating the global electronics industry will grow by around six percent in 2021, led by the Asian and American markets. Shopping, already moving heavily towards e-commerce, was fundamentally altered by the Covid-19 pandemic in ways that will likely endure and combined with increased sales could create a perfect storm of returns. According to Selligent, 36 percent of people have been shopping online at least once per week since Covid-19 hit, and post pandemic, 39 percent say they will do both in-store and online shopping, while 28 percent will shop mostly online.
While electronics e-commerce growth is excellent, it also brings an increase in returns volume as consumers become less likely to demo products in-store before purchase. Magneto IT Solutions and Global Web Index both reported that 42 percent of electronics purchased online in 2019 were returned, and in 2019, Chain Store Age reported on two surveys, one from TechSee which showed 41 percent of consumers returned a non-defective item in the previous 12 months, contributing to more than $17 billion in lost revenue annually for store and online retailers; and another from Accenture, in which 68 percent of all consumer electronics returns fell under the umbrella of “no fault found” situations, wherein an item is returned needlessly. These pre-pandemic numbers are likely to rise.
To successfully mitigate the problems associated with high numbers of returns, electronics retailers must plan for returns while also trying to reduce the volume.
Lessons from the world of Hi-Fi
Not every electronics retailer deals in high-end equipment, but this doesn’t mean they can’t learn from those who do. Hi-Fi audio manufacturers and retailers understand the need for an in-home trial period. Kef, JBL, Cambridge Audio, U-Turn Audio, and many others offer 30 day return policies which allow consumers to try the unit and return it if they’re dissatisfied.
A close look at PS Audio's return policy is enlightening:
“In the United States, customers can purchase directly from PS Audio and enjoy the benefits of in-home audition and free shipping. We’ve always known that your living room is our best showroom and we believe it won’t take much of a listen to hear what PS can do for your music. PS Audio provides free shipping to any US resident when you order through our website. It’s safe, secure, and easy. Once you receive the product you have a full 30-days to enjoy and evaluate it in the comfort of your home. Should the product not live up to your expectations we offer a no-hassle return policy. Simply call or email us and we’ll give you a return authorization. Once returned you will receive a 100% credit back on your credit card. It’s that easy and we’re that confident you’re going to love what you get from PS.”
With this model, PS Audio provides a few key lessons:
- Offering a trial period shows confidence in product quality.
- Prioritizing customer support ensures customers have the best quality experience.
- Offering easy returns eliminates both the risk and burden for the customer.
Hi-Fi audio manufacturers and retailers understand the importance of prioritizing the customer experience, knowing their best customers are likely to make returns. They also know those returns are an opportunity to sell to an engaged customer who’s already seeking to make a purchase that matches their needs.
By applying these lessons to their own returns processes, electronics retailers outside of the Hi-Fi industry may begin lessening returns volume and, perhaps more importantly, managing returns. How they handle those inevitable returns impacts both the quality of the customer experience and customer satisfaction, as well as the associated costs to the organization.
Managing returns is a two-phase process.
First, electronics retailers must reduce the cost of returns. To do so, they should calculate the cost of returns; knowing whether a $20 product costs $5 to ship each way is useful data for making an informed decision and can ensure they don’t fund return shipping for low-margin products like a $5 power cord. Instead, they may opt to let the customer keep it as a cost-saving measure. Knowing required shipping speeds and destination for returns can likewise provide critical information; some returns must be expedited, and the extra costs may impact margins for competitively priced products. Getting high-value products returned as quickly as possible to the right distribution center, warehouse or store enables quick turnaround time for resale.
Multi-carrier parcel shipping can play a critical role in keeping returns costs as low as possible while meeting any time requirements. As carriers change rates, add new surcharges, delay schedules, etc., equipping customer service teams with multiple carrier services from which to choose when processing a return helps ensure they can select the best or most appropriate carrier service, rate shop to keep costs low, and identify and work around any service delays or disruptions.
Second, electronics retailers must determine the most cost-effective strategy for executing returns, for which there are two approaches: customer-driven returns and proactively prepared returns. Before choosing the best approach, retailers must determine whether to factor the cost of returns into product prices, as building the cost of returns into products can reduce or eliminate the impact of returns volume on profit margins.
Analytics and reporting tools can help electronics retailers better understand the cost of processing returns, including overall rate of returns and rate of returns by product or another desired categorization. Once armed with this data, electronics retailers can determine whether it makes sense to integrate these returns costs into the initial cost of outbound shipments as well as which carriers and service levels to use. After this has been decided, electronics retailers can turn their attention to which approach they prefer for executing returns.
Customer-driven returns are initiated when the customer contacts the merchant, completes a screening with a returns representative, and the merchant selects the best carrier service based on the information provided. The merchant then sends the shipping label and any other required labels (such as hazmat) to the customer to package the item for drop off or pick up by the selected carrier.
Proactively prepared returns remove the customer’s obligation to initiate the returns process and request the return label(s). Instead, the merchant selects the best carrier service during initial shipment for both the outbound shipment and possible return and includes the required return labels in the box, streamlining the returns process for both the seller and the customer.
The Hi-Fi audio industry clearly understands both the value of customer experience and the sales opportunity that inevitable returns present; these manufacturers and retailers have structured their return policies around the customer. Other electronics retailers can apply this same approach. By preparing for and managing returns, they can reduce costs and build loyalty through excellent customer service even as returns volumes rise following the fundamental changes to the way consumers shop post-pandemic.