FUTURE OF MERCHANT GROWTH

Returns are an opportunity for your brand, not something to dread

Insight #1: Returns are a retention & profit center

Shift your thinking from growth at all costs to building a profitable and sustainable business using returns as a way to leverage profits.

Product returns are a turning point in the shopper relationship

No merchant wants their shoppers to return the products they’ve bought. However, in 2023, returns are becoming a regular part of the shopper experience—shoppers return as many as 30% of ecommerce sales.

If you aren’t leveraging your returns as a way to retain your most valuable shoppers, you stand to lose their business. With the right returns solution, you can optimize for exchanges and increase revenue during the post-purchase experience by up to 40%.

Recommendation: Build a shopper retention strategy that leverages returns as a key touchpoint in the shopper journey.

Focus on keeping your best shoppers happy

As customer acquisition costs increase, it’s important for merchants to prioritize strengthening the relationship with the shoppers they already have, to drive more lifetime revenue from each shopper. After all, it costs five to 25 times more to acquire a new shopper than to keep an existing one, and improving customer retention by 5% can increase profits by 95%.

That means your money is better spent appealing to your existing shoppers—improving customer experience at all touchpoints with your brand, even during the returns process. In fact, 61% of customers have cut ties with a brand over a bad customer experience.

Recommendation: Shift your efforts from acquiring new shoppers to pleasing current shoppers—they’re worth more to your business in the long-term.

Focus on profitability as a key metric of success

By focusing on profits over growth as a key metric, merchants can plot a sustainable path for their business even in uncertain times.

It’s more important than ever to scrutinize your balance sheet and financial reports, so that you can be aware of your brand’s profit margins and if they fall within norms. Make sure that you know the difference between gross and net margins, and can plan a sustainable forecast based on your current and predicted sales rates and margins.

Recommendation: Rather than focusing on product returns as an operating loss, look at them as another opportunity for driving revenue and retention.

Insight #2: Fight supply chain costs with automation

Use the right technology and Shopify partners to help you scale your shop efficiently to minimize operational disruptions in returns.

Supply chain disruptions are here to stay, and merchants need to adapt

COVID-19 triggered massive disruptions to the supply chain that the world has still not recovered from, so it’s important to be creative when it comes to fulfillment.

Merchants are facing material shortages and production delays with both inbound and outbound logistics, which means a greater likelihood that your shoppers’ favorite products will be out of stock. To meet shopper demand (and mitigate shopper dissatisfaction), it will be important for merchants to act with agility and transparency, before and after fulfillment.

Recommendation: Provide curated product recommendations to show relevant alternatives during an out-of-stock instance and expedite your shipping with 3PLs and other fulfillment solutions.

Use automation to drive operational efficiency

Merchants can automate returns processes to eliminate repetitive tasks and reduce workforce costs. Pairing hyper-automation technology with improved operational procedures would reduce operational expenses by 30% by 2024.

On the marketing side, you can create automated marketing workflows with personalized content that’s triggered by user behavior, to drive a higher engagement rate and encourage shoppers to buy more frequently. And by using automated returns management tools, you’ll be able to reduce customer support time spent managing refunds and returns, resulting in faster customer service.

Recommendation: Make use of automated tools to support your operations fully.

Better data analytics lead to optimized costs and operations

Your data can offer your business a wealth of insights to inform your strategy. Use analytics reports to identify both problems and trends: for instance, you might create reports to show you which products or brands have the highest return rates, and take steps to improve your product descriptions.

By analyzing which marketing channels offer the highest and lowest return on investment, you’ll be able to optimize your spend to focus on the more successful channels so that you can increase engagement and conversion rates. That can help you shape your marketing and product strategy overall, as well as building custom marketing campaigns designed to appeal to each user segment.

Recommendation: Use analytics tools to help you understand your customers’ behavior, and predict how they’ll act in the future based on past performance.

Insight #3: Bet on yourself and learn as you go

Iteration is key to successful innovation.

Brands that respond to their shoppers’ needs are leading the way

Leading organizations focus heavily on shopper experience. Brands that provide a good shopper experience generate 5.7x more revenue than competitors.

You can use sentiment analysis tools to gather and consolidate feedback from the web and social media about your brand, and identify issues that should be addressed. You can gather powerful insights from your return data as well.

Recommendation: Use your return data insights to understand why returns are happening—both on a product and a category level—and use this information to improve your product marketing strategies and your inventory selection.

Embrace partnerships and walk hand-in-hand

If you’re a Shopify merchant, you have access to hundreds of partner apps and companies who–spoiler alert!–are made up of real humans who want what you want: To build a successful business. Remember this when you’re making budget decisions in 2023.

It’s one thing to cut unnecessary costs, but it’s another thing to cut under-leveraged costs. If things continue to remain a little shaky this year, that’s an opportunity for us to come together. Not grow apart. So it’s important to explore mutually benefitting partnership opportunities with the hundreds of Shopify partners available to you. It may just help unlock the profitable growth you seek.

Recommendation: Take a day out of your week to explore Shopify’s partners, and see who can help you do better. There’s helpdesk apps, marketing apps, and return management apps like Loop available to you—all you have to do is dare to reach out and take a chance.

Constant iteration is key to optimizing performance

In order to improve performance, it’s important to continually test and measure to help you optimize results. When it comes to understanding how to best allocate your budget and resources, test and measure relentlessly.

A/B test your marketing campaigns to understand what customers respond to, making small tweaks to subject lines, graphics, CTAs, and other elements. When developing a new product, embrace the “minimum lovable product” model—build fast, and fail often.

Recommendation: Use tests and experiments to inform your ongoing brand strategy.

Want to know more about the

Future of Returns?

Future of Returns

Is your brand ready for the Future of Returns? Here’s what to know.

Future of Shopper experience

Keep your best shoppers happy—especially during a return.

Future of Reverse Logistics

Returns aren’t going away, they’re only growing—and that’s good.

2023 Benchmark Report

Learn where your brand stands—so that you can plan for the future.

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