How Returns Automation Helps Improve Your eCommerce ROI
June 01, 2023
by Rebecca Fox

More and more online stores are turning to automation to streamline their returns management. It’s no wonder why – automating your returns can reduce costs, improve efficiency, and improve your return on investment (ROI). 

Let’s explore how returns automation can be a game-changer for improving your store’s profits and eCommerce ROI.

What is Returns Automation and Why is it Important?

Returns automation is the process of streamlining the return process for online purchases. This involves automating all aspects of the return, from return authorization to processing refunds and exchanges.

Automating your returns with a returns management system makes the returns process faster and more efficient both for you and your customers.

By automatically generating return shipping labels, issuing refunds, releasing exchange orders, and sending email notifications, you can increase efficiency and improve the customer experience.

A returns automation system can help you:

  • Save time and money – Save time and resources by minimizing manual work and human errors.
  • Improve the customer experience – Improve customer satisfaction and retention by providing a seamless return experience.
  • Boost sales – Increase sales and conversions by offering incentives and options for customers to keep or exchange their products.
  • Track data – Gain insights and data on your return rates and customer behavior.

Using advanced technology to streamline the return process helps improve the customer experience and reduce the costs associated with returns processing, thus increasing ROI.

How eCommerce Returns Automation Improves Your ROI

Now that you know what eCommerce returns automation is and why it’s important, let’s see how it can improve your ROI and profitability. 

Here are some of the ways returns automation can help you improve your ROI:

Reduces Costs

By automating your returns process, you can cut down on the expenses associated with returns and exchanges. 

For example, you can reduce the costs of:

  • Customer service – Providing self-service options for customers to initiate and track their returns frees up your customer service team’s time and resources for other tasks.
  • Shipping – Offering pre-paid return labels and integrating with shipping carriers reduces shipping costs and keeps you from paying for unnecessary shipping materials. 
  • Processing – Automating the refund process and minimizing manual work speeds up the refund process and reduces human error and delays.
  • Restocking – Ensuring that returned products are in good condition and ready for resale prevents product damage or loss and increases your recovery value.

Using returns automation can hugely reduce your store’s operational costs and improve your returns management ROI by making your returns process more efficient.

Increases Revenue

Automating your returns process can boost your revenue and sales. Automation makes the returns experience more convenient and efficient, which can help build customer trust, leading to increased customer retention and higher customer lifetime value.

Revenue metrics you can increase with returns automation include:

  • Customer lifetime value – Encourage repeat purchases and referrals from satisfied customers to increase customer lifetime value (LTV). 

By automating your returns process, you can make it easy and convenient for customers to return or exchange their products, which can increase their loyalty and trust in your brand.

  • Average order value – Offer incentives for customers to keep or exchange their products instead of returning them to increase the average order value (AOV).

For instance, you can offer discounts, credits, or gift cards for customers who choose to keep their products or exchange them for something else. This can help you reduce the number of refunds and retain more revenue per return.

  • Conversion rate – Reduce cart abandonment and increase customer trust with a clear and straightforward return policy, leading to a higher conversion rate.

An automated returns process makes it easier for you to provide customers with more information and options about your return policy, which can reduce friction and uncertainty that may prevent customers from completing their purchases. 

Enhances Customer Loyalty

Customers appreciate it when you make it easy and convenient for them to return or exchange their products, without any hassle or hidden fees. By automating your returns process, you can reduce waiting time and prevent confusion for customers by providing more information and options.

81% of customers consider clear information about return policies to be an important factor when deciding where to shop.

Customer loyalty is one of the most valuable assets your eCommerce store can have, as the average amount spent per purchase by loyal customers is 67% higher than by new customers.

You can reward your customers for their loyalty by offering them incentives to shop with you again. Having an automated returns process enables you to send automated messages to customers who have returned items, thanking them for their purchase or giving them a discount, thus increasing customer loyalty and retention.

Provides Data and Analytics

When you implement a return automation system, you gain access to valuable data about your returns process such as the number of returns, return reasons, and return rates. 

Returns data can be used to identify trends and patterns, helping you optimize your inventory management and product offerings to reduce future returns.

Return automation also enables you to track and analyze customer behavior related to returns, including the time it takes for customers to initiate a return, the frequency of returns from certain customers, and the products that are most commonly returned. 

By analyzing this data, you can gain insights into customer preferences and needs, which can help you improve your product offerings and customer service.

How to Measure Your ROI Growth

To measure your eCommerce ROI and see how your returns process impacts it, you need to track and analyze some key metrics and KPIs that reflect the efficiency of your returns process. 

Here are some returns metrics to monitor:

  • Return rate – Percentage of orders that are returned by customers. It indicates how well your products meet customer expectations and how effective your product information is. 

The lower your return rate is, the fewer returns you’re processing, leading to higher profitability.

  • Cost per return – Amount of money that you spend on each return transaction, including shipping, processing, restocking, refunding, or any other fees associated with returns. It indicates how efficient and profitable your returns process is. 

A high cost per return may indicate that you need to optimize your returns process and reduce unnecessary expenses.

  • Revenue per return – How much revenue you generate from each return, including the revenue from upselling, cross-selling, exchanging, or keeping products that would otherwise be returned. 

An increase in revenue per return translates to increased profits as you’re able to retain or generate more revenue from returns.

  • Customer satisfaction – Degree of satisfaction that customers have with your returns process and experience, including the ease of initiating and completing a return, the speed and accuracy of the refund or exchange, the flexibility and convenience of the return method and resolution, and the quality and responsiveness of customer service.

When you see an increase in customer satisfaction, customers are more likely to shop with you again and refer others, resulting in higher profits.

How to Calculate eCommerce ROI

To calculate your eCommerce ROI, subtract your total costs from your revenue, divide that number by the total cost, and then multiply by 100 to get the percentage.

ROI = (Revenue – Cost) / Cost * 100%

This formula shows you the percentage of profit or loss that you make from your eCommerce store. 

Having a low eCommerce ROI means you spent a lot in comparison to what you made, while having a high ROI means your profit margins are better. The higher your ROI, the more profitable your eCommerce store is.

The average ROI for eCommerce stores is between 20-50%, depending on many factors such as industry, ease of returns, shipping costs, product quality, and cost of returns.

Examples of Stores for Which Returns Automation Has Improved ROI

To inspire you further, here are some examples of how leading brands have improved their ROI with eCommerce returns automation:

One Project

One Project, an eCommerce fashion platform that offers products from over 100 popular brands, uses returns automation to offer exchanges and gift cards in addition to refunds, helping to retain and even generate more revenue. 

“By allowing customers to exchange products, and not refund them, we manage to save a lot of money on customers who don’t make a refund and just make an exchange. This helps us achieve our KPIs from a revenue aspect.”

One Project has seen a number of positive outcomes since using ReturnGO to automate its returns process:

Decrease in Refunds

Since offering customers the option to exchange products and receive refunds through gift cards, One Project has reduced its average refund rate by 10%.

New Revenue from Exchanges

One Project has been able to generate new revenue by offering easy exchanges and gift cards, in addition to retaining revenue that would have otherwise been lost through refunds.

Increased Efficiency

ReturnGO’s automated and streamlined processes have improved the efficiency of One Project’s returns management workflow by offering easy product exchanges and seamless integrations.

“We saw it very quickly. I thought it would take a couple of months, but in 2-3 weeks we already saw that the amount of revenue lost to refunds was decreasing.”

– Shmulik Konforty, CTO, One Project

Read the full One Project case study.

Silk & Salt

Silk & Salt, an eco-conscious fashion brand, has managed to generate 24.9% additional revenue from redeemed store credit since using ReturnGO to automate its returns process.

Since automating their returns, Silk & Salt has seen the following benefits:

24.9% New Revenue

Silk & Salt saw that when customers redeem store credit, 61% of them spend more money, generating an average of 24.9% additional revenue. 

Optimized Returns Management

Using advanced features such as automation and flexible policy rule settings to adjust their return eligibility conditions to match their return policy, Silk & Salt is able to manage and process return requests more efficiently.

Reduced Costs and Time

Automation rules and an intuitive self-service return portal have significantly reduced the number of customer support queries, freeing up the Silk & Salt team to focus on other essential tasks, resulting in cost and time savings.

“Once you have all of your automated rules set up in ReturnGO, you don’t need to do anything else for returns to go through. Everything goes smoothly. Simple as that.”

– Assaf Neuman, Head of Operations, Silk & Salt

Read the full Silk & Salt case study.

Underoutfit

Underoutfit, an innovative activewear & underwear brand, has automated its returns process, leading to positive outcomes in its main KPIs such as the number of full refunds given, the resources spent on customer service, and the costs of return shipping and handling.

Automating the Underoutfit returns process had the following results:

25.6% Decrease in Refunds

Since offering store credit and variant exchanges, Underoutfit has seen a 25.6% decrease in refunds, while sales and RMAs have increased.

16.4% New Revenue

When Underoutfit customers redeem their store credit, more than 51% spend more money, generating an average of 16.4% additional revenue.

Reduced Costs

Since implementing a streamlined returns process, customer support requests have decreased almost completely, saving Underoutfit thousands of dollars a month.

“ReturnGO’s analytics provides more than basic statistics such as how many products were returned and what the return rate is, it also provides other interesting insights from which you can really conclude which products are more profitable and which are less so.”

– Felix Leshno, Co-Founder & CXO, Underoutfit

Read the full Underoutfit case study.

Automate Your Returns to Boost Your Profitability

Automating your returns process is a smart business strategy that can significantly improve your ROI and profitability. 

By leveraging ReturnGO’s returns automation technology to streamline the returns process, you can reduce costs associated with manual labor, while increasing revenue and improving customer satisfaction and retention. 

Gain a competitive edge in today’s fast-paced market by automating your returns process, benefitting both your customers and your bottom line.

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