5 Ways Returns Fuel DTC eCommerce Growth with Loop
CPG & DTC are becoming great friends.
By now it should be very clear: the Internet is where commerce happens. It's not changing anytime soon either - some experts claim 50% of mall department stores will be closed by the end of 2021.
If you are looking to join the ranks of DTC ecommerce brands, you're in luck. Shopify has put together a guide to help CPG companies get started. They correctly point out that online shopping is "the new normal".
The data is in too: ecommerce sales growth for CPG brands will hit 40% by 2021. And according to this article, in-store retail growth numbers are flat.
In response, DTC ecommerce agencies like BVA are springing up to get big CPG players online fast. So with Shopify's support, and the help of an agency, there's just one more thing to consider... Returns.
Returns drive profits for ecommerce DTC brandsYes! Returns - otherwise known as the thorn in any CPG brand's side. An annoying nuisance to be dealt with, right? Not anymore! Returns are fast becoming a huge driver of growth for DTC brands.
At Loop we've built a business on returns & the entire post-purchase experience. We've seen firsthand how brands can turn returns into a profit driver. Naturally, we have some ideas to share.
Here's what we'll cover today:
- Save time & money with returns automation
- Return policy as a marketing asset
- Post-purchase customer experience
- Exchanges keep revenue in your brand
- Returns give powerful business insights + data
Why returns matter when moving to DTC ecommerceCPG brands are often deep in the weeds with supply chain & logistics concerns. When you're selling directly to consumers, there are a whole new set of considerations. One of those is returns.
Traditionally, in-store retail handles returns for CPG brands. If you have your own locations, great. It's a one stop shop. If you have a relationship with the stores that carry your product, they can help carry the weight as well.
But the DTC audience presents consumer brands with different challenges - and different expectations. Commerce sales online require a full service approach more than traditional retail.
Whereas in-store retail diffuses responsibility to different parties, when you go DTC, that means your brand is responsible for the entire shopping experience. That doesn't end after purchase either.
Returns will be a big part of the DTC ecommerce experience. Most people think about returns as a singular problem. Instead, they are an important through-line for the following business concerns:
- Customer experience
Each item on the above list corresponds to our 5 DTC ecommerce tips in this article. So if you're ready to take your CPG into the DTC world, don't ignore returns - let's go!
1. Save time & money with returns automationReturns take up a huge amount of time for DTC brands. If you sell directly, then returns often need to be sent back directly. And the more your brand sells, the more your customer service team needs to handle.
Here's the thing. Every manual return can have up to 10 touch points before resolution. If each takes 5 minutes, the time - and the costs - add up quickly.
- Easy Return: 3 customer touchpoints x 5 mins = 15 mins
- Complicated Return: 10 customer touchpoints x 5 mins = 50 mins
Here's what a solid returns automation platform will do for a brand: give their customer service team their time back without sacrificing customer experience. Loop does this with:
- An "always-on" returns portal
- Auto return policy enforcement
- Approve returns automatically
- Integration into existing DTC marketing apps
Investing in returns automation software means your DTC effort can get off the ground without building a massive customer service team.
2. Return policy as a marketing assetHow many digital marketing plans include "return policies"? Marketing strategies are about growing target audiences & expanding sales channels... not refunding unsatisfied customers! Wrong-o.
Our data suggests more than 60% of first-time customers check your return policy before they make a purchase. Another recent study suggests that 81% of consumers NEED to trust your brand before doing business with you.
So - marketing agencies take note - the return policy is a marketing asset. It will boost online sales commensurate with how much trust it instills in the customer.
The perfect example is one of our favorite brands, Brooklinen. They offer an out-of-this-world 1-year return window on bed sheets. If they rip on day 364 - return them for a full refund.
As one of the biggest bedding brands in DTC ecommerce, safe to say they wouldn't be offering this much if it wasn't paying off in a big way.
3. Post-purchase customer experience includes returnsThe DTC world is becoming more about customer experience than anything else. Companies are now investing more in customer experience (46%) compared to pricing (21%) and product (34%).
Just to repeat, brands are spending more on customer experience than they do on product! What does that look like for a CPG brand?
It could mean a rewards program. Maybe subscription products. Exclusive offers... and returns!
One way to make customers fall out of love: make returns a challenge. But make it easy? They'll really appreciate that.
4. Exchanges & giftcards keep revenue in your brandWhether you call it DTC or "D2C" - ecommerce is the way. And revenue matters.
By now you are probably wondering what returns have to do with revenue. At Loop, we've found that turning refunds into exchanges is 10x more impactful than reducing return costs. Most importantly, they keep revenue in the brand.
But beyond that, exchanges (or gift cards) keep customers engaged. This gives you a chance to win them over - all over again. It pays off too: when customers choose exchanges over refunds, they’re more likely to leave a positive review, refer friends, share on social media, & become lifelong customers.
This concept worked great for Chubbies Shorts, who were able to increase customer LTV by 100% through returns alone, mostly by offering exchanges. CPG brands won't have the exact same play as an apparel brand, but there are still huge wins waiting here.
We ran the numbers and found that when a customer makes an exchange, they are 46% more likely to make a repeat purchase. That's data directly from Shopify merchants using Loop to process 440+ million returns.
Returns pave the road to retained revenue. Exchanges & gift cards can help make the jump to DTC that much easier.
5. Returns give powerful business insights + dataHere's something DTC and CPG have in common: a data-driven approach pays off. Guess what? Returns are a huge data-center that many brands totally skipped.
All it takes is a couple of questions during the returns process. Of course, it helps when you have a little help from an automated returns platform. With Loop, our automatic returns system let's the end-user answer two branching questions. In two-clicks, customers have given you powerful data to fuel growth.
However you collect the data, make sure of one thing: put it to use. Customers are telling you exactly what went wrong with their product. In the world of CPG, this could help you find common problems and correct them immediately.
Drive your DTC success with returnsDTC is currently one of the hottest opportunities for CPG brands. Just don’t forget that returns demand a different focus when compared to retail environments!
Loop is fueling growth in the returns touchpoint for brands like Knix, Chubbies, Nisolo, and many more. Our software gives brands the tools they need to automate returns from start to finish. BVA works with Loop as an agenct partner to implement holistic eCommerce strategies and create exceptional customer experiences for our clients.
Reach out to us here to learn more about how to optimize your returns experience.