Ice your Competition with a Cool Return Policy

By Michelle Megna
May 16, 2007

Though online sales continue to grow, there's still room for improvement, specifically in five areas, including site merchandising and return policies. Those e-tailers who address these issues can maintain an edge over the increasingly crowded field of competition, according to a report issued yesterday by Forrester Research, Inc.'s e-commerce analyst Sucharita Mulpuru.

In "Five Immediate Opportunities for E-Commerce Improvements" she outlined shipping/product delivery, multi-channel coordination, security, "touch and feel factors" and "product discovery" as the areas in which e-tailers need to improve to increase customer satisfaction. The findings are based on "conversations with online sellers, merchant surveys, and annual surveys of thousands of online shoppers."

Rather than look at these issues as shortcomings in the industry, she advises Web shop owners to capitalize on the chance to improve the shopping experience, which will provide an advantage over those who fail to do so.

Shipping issues continue to dog e-tailers. "Shipping shortcomings and unmet customer expectations with respect to order delivery are the most commonly cited issues when online customers say they are frustrated with the channel," according to the report. "Shipping charges are the primary cause of shopping cart abandonment, and consumers cited lengthier-than-expected shipping time frames as the top reason for disappointing experiences online during the past holiday season."

In fact, 27 percent of online consumers say the hassle of returns is one main reason they do not make more purchases online. The study continues to say that only 24 percent of e-tailers prepay for customer returns online, with 14 percent even charging customers with restocking fees for returns.

Mulpuru offers this advice: "As painful a pill as it may be to swallow, any efforts to reduce friction in delivery or reverse logistics issues for customers have sales upside. Yes, it is costly to offer a feature as generous as free return shipping, but Zappos.com and Blue Nile did not cultivate large and loyal customer bases by scrimping on the things that matter most to customers."

The next area cited in the report is multi-channel coordination, namely the option for those with brick-and-mortar businesses to offer pick-up at their retail site. Online shoppers say the primary reason they buy offline even though they researched products online is to receive products immediately, with almost 40 percent reporting that they wished more stores offered in-store pickup.

If synching your inventory is too big of a challenge, Mulpuru says e-tailers can "labeling single-channel-only products as such on product detail pages with availability and pricing disclaimers helps to manage customer expectations without over-promising cross-channel consistency."

Another challenge outlined in the study involves the Web's inherent disadvantage in conveying product attributes, such as density and durability, and the fact that online shoppers simply cannot physically inspect items prior to purchase.

Improvements such as the use of zoom and color swatching are becoming more standard, used by 48 percent and 37 percent of e-tailers, respectively, but Mulpuru emphasizes that detailed product pages must be a priority.

"All companies that sell products online should develop checklists for these pages, ensuring that copywriters and vendors/manufacturers fill out all key attributes. Content directly from manufacturer Web sites, enabled by companies like WebCollage, provide another useful source of product information," she says in the report. "Additionally, customer feedback, either aggregated as ratings or explicitly shared as reviews, is valuable for disclosing the strengths as well as the shortcomings of products — information that retailers or manufacturers rarely provide."

In terms of connecting shoppers with the products they're looking for, or "product discovery," the study states that site-search tools must be sophisticated, for instance, offering merchandising suggestions such as "customers who purchased this item also purchased this item." Surprisingly, few e-tailers have yet to embrace such technology.

"While startups such as Aggregate Knowledge and CleverSet are attempting to create solutions that simplify the process and reduce the cost of driving automated cross-sells on a product detail page, the overall use of personalized recommendations remains low, with just 16 percent using these tools," according to the report. "Our advice, virtually all sites can benefit from better cross-sells. Automating the process with help from numerous new vendors like the ones mentioned above can reduce the inefficiencies that surround the current worst practice — handpicking cross-sells." (See our story "Tap the Power of Suggestion to Bump Sales," covering companies such as CleverSet.)

Finally, as far as the holdouts, consumers who have yet to jump online to shop, security concerns remain the top obstacle, the report states. Furthermore, 62 percent of those who have never shopped online still have fears about providing personal information over the Internet.

The study points to the unsuccessful bid by Google to capture this market with the launch of Checkout, and says that the service is actually primarily used by young tech-savvy males. Still, Mulpuru recommends services such as Checkout and PayPal as the best ways to address online security issues, noting that the holdouts may never be convinced that online shopping is safe