The “refund effect” can help retailers convert returns into exchanges

nShift Returns customers typically convert 30% of returns to exchanges

With the right retail returns management strategies in place, returns can reduce losses and increase customer loyalty, nShift says today.

According to a study published Harvard Business Review (HBR), cross-selling products during the return process can help retailers retain revenues through what researchers have called the ‘‘refund effect”.

The refund effect describes the consumer psychology of repurchasing a new product in the event of a return. When a customer makes a purchase, they consider the money spent. That could make them more willing to consider exchanging a returned item for a different product rather than receiving a refund.

nShift, the global leader in parcel delivery management software, can help multichannel and ecommerce retailers reduce retail returns related refunds by up to 30%.

Refunds on returned items lead can undermine retailers’ profits. The HBR study found that US consumers returned 16.5% of online purchases, costing retailers an estimated $816 billion in lost revenue in 2022 alone.

Convert returns into exchanges

nShift has the following advice for retailers looking to create return policies and practices to capitalize on the refund effect:

• Make the returns process simple - a consumer-friendly returns interface makes it easier for the customer to exchange the item they are sending back for something else. With the right returns software, retailers can digitize the entire experience.
• Creating remarketing opportunities – emails about returns have significantly higher open rates than other retail communications. Retailers can create additional sales opportunities by weaving marketing messages into these emails.
• Drive footfall in-store – a digital returns process makes it easier to give customers the opportunity to take their items back into the store, making it easier to re-shelve returned items and increasing the likelihood of exchanges

“Shoppers expect to be able to return products they buy online and are loyal to brands with a customer-friendly returns policy”, said Sean Sherwin-Smith, Product Director Post-Purchase at nShift. “It can be a real point of difference for retailers if they get it right and, as the study shows, it’s an ideal opportunity to cut revenue loss and strengthen the relationship with the customer at the same time.”

One company that has used the retail effect to great impact is Hunkemöller, Europe’s fastest-growing lingerie specialist. By using nShift Returns, it has been able to offer its customers a seamless reverse ecommerce experience and has seen a spike in sales driven by a change in customer behavior, shifting online to warehouse returns towards in-store with an increase of 15%.

Part of nShift’s end-to-end Delivery Management Suite, nShift Returns is designed for retailers of all sizes. It creates a clean and simple consumer experience and reduces the administrative burden of manually processing returns to save time and money.

ENDS