Plus: How to turn a return into a loyal customer | Why store visits just got higher stakes
Your customers are already telling you what they want. Sometimes you just have to know where to look.
This week we dig into what the data hiding in your returns and your toughest retail moments is actually telling you—and how smaller retailers can make faster, smarter pivots than any big chain. Returns stink, but the chance to learn more about what your customers are looking for—and to lure them into your store for fast, free exchanges (more data)—could be the silver lining you didn't know you had.
Before we get into it, check out this explainer on why the nickel may soon go the way of the penny.
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How to lower the cost of returns while increasing loyalty
Like every point in the retail journey, returns are now expected to be personalized. Is a customer requesting a refund or an exchange? That could be the difference between paid and free returns and a lost or loyal customer.
E-commerce sales account for about 20% of total retail sales, and about half of those sales are on track to result in a return by the end of the decade, according to forecasts by EMARKETER. When customers can’t touch, smell, taste or try on a product, there’s always a chance they’ll send it back, and retailers have been conditioned to accept the reverse logistics costs–shipping, packaging, restocking or refurbishing, and sometimes having to forfeit the inventory altogether.
But returns can cost you in other ways—if the transaction isn’t smooth and doesn’t add value in terms of exchanges or incentives, you could lose a customer altogether on top of paying their return costs. The solution is two-fold: find out why customers are making returns and work to remedy those issues, and incentivize them to exchange or make additional purchases by offering free exchanges, while refunds require paid returns and/or restocking fees.
Why this matters: You should make every effort to ensure your customers buy a product they love, but the inevitable return is also an opportunity to improve upon the customer experience. In addition to incentivizing exchanges over refunds, encourage in-person returns with other special offers or services that they can only get in your store. By treating every return as an opportunity to learn more about your customer, you’ll not only lessen the financial blow, but you could also earn more sales and loyalty. (EMARKETER)
Successful retailers do this to thrive during tough times
It’s often said that bad events don’t define you, but how you move through the challenges does. That’s never more true than in retail, where the best merchants are adept at turning lemons—like falling consumer sentiment, higher costs of doing business—into lemonade.
Harvard Business Review recently published a study tracking 32 large, mature retail companies over eight years and analyzed where some went right and others wrong. It’s valuable insight for small retailers too, because in every case, it involves knowing where you are in your trajectory and balancing revenue and growth with costs.
It starts with choosing the right location and being laser-focused on your customer. Don’t overextend yourself just because your sales are good. At the same time, investing in e-commerce is a smart move so long as you’re offering customers something they can’t get elsewhere for less. And while cutting your costs can be hard—shrinking hours and labor is hard for lean teams—you can also reduce markdowns and either invest that extra cash wisely or stash it away for a buffer.
Why this matters: Studying macro trends from large chain stores is also valuable because you learn what not to do. When a major department store like Nordstrom can’t remain profitable after opening a new location, chances are a smaller store can’t either. One thing you have over the big box players is agility. Instead of taking years to make changes, you can make smarter moves in weeks or months. (Harvard Business Review)
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What Etsy's merchants know about shaping tastes, culture
AI is great for scaling retail tasks and operations, but nothing beats human insights, especially when it comes to curating emerging trends and cultural moments for shoppers. Mary Andrews, Head of Global Merchandising at Etsy, sat down with Retail Touchpoints’ Retail Remix podcast to share how her team identifies these retail moments and uses AI to personalize what millions of users see in their feeds and on their homepages. Andrews touts AI for actually bringing niche interests like handcrafted baskets or upcycled fashions to the forefront for certain users. At the same time, she said her team’s role has shifted toward becoming more arbiters of taste rather than solely product-focused.
"For things like emerging trends or a visual vibe, that je ne sais quoi, that's where the art of us as merchants is still really important." —Mary Andrewz
Why this matters: AI can surface what's trending but it can't tell you why your specific customer cares. That's the job only you can do. Andrews' point is worth sitting with: the retailers who stay relevant aren't the ones who automate the most, they're the ones who combine data with taste. (Retail Touchpoints)
AI is giving your store a new role
Shoppers are doing more research at home with help from AI, making store visits less frequent but more intentional, according to a new report from McKinsey and ICSC (International Council of Shopping Centers). Consumers are happy to take suggestions from AI, but only 16% are comfortable letting a bot make a purchase for them. This means that stores are becoming the final step in the purchase, making the physical experience more high-stakes. It becomes the retailer’s job to guide their customers to their final choice and close the sale.
Why this matters: Stores still have an important, but changing, role in the purchase journey. With customers doing more research online with help from AI, you need to offer a seamless purchase experience and/or discovery that makes the visit worth the trip away from home. (Axios)
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The SKUpe is curated and written by Marcy Medina and edited by Bianca Prieto.
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