This post originally appeared on The Current.
Faced with the challenges of a pandemic-induced recession and an overall slowdown of consumer spending, retailers are looking to cut costs. Some brands see free delivery and returns as an exorbitant expense in this challenging environment, but worry that consumers will spend elsewhere if their expectations for ease aren’t met.
They’re right to fear the consequences of refusing what their customers want. But it doesn't mean it should cost them an arm and a leg.
At Veho, we conducted a survey of 1,000 online shoppers across the U.S. about their shopping, delivery and returns preferences. The results couldn’t be clearer: Shoppers have little patience for brands that implement rigid delivery and returns policies—and they’ll be loyal to brands that make the entire shopping experience as convenient and seamless as possible. In an era defined by selective, convenience-driven consumer behavior, the retailers that invest in providing a great delivery and returns experience for their shoppers will ultimately come out on top.
The post-purchase experience is the next great frontier for the ecommerce industry. From luxury brands to household goods, consumers are consistently spending more online, even if overall spending has cooled down. In March, though retail sales in the U.S. dropped 1%, online shopping was up 1.9%. Despite the volatile economy, the smartest retailers will invest in their online shopping and post-purchase experience to keep ahead of the turning tides.
Consumer behavior has changed—and retailers need to catch up
The landscape of shopping has changed dramatically in the last decade, and retailers need to shift their focus to the new landscape of shopping: people’s front doors and living rooms. Consumers may not be spending as much in brick-and-mortar retail, but online shopping has grown considerably year-over-year. The U.S. ecommerce market is expected to hit a record high of $1.1 trillion in sales in 2023, and 20.8% of global retail purchases are expected to take place online this year. It’s clear that the digital world will soon become the new environment of retail shopping.
For busy consumers, the ease of online shopping can’t be beat. Direct-to-consumer (DTC) brands like Warby Parker and Allbirds fundamentally understand this advantage and have designed generous delivery and returns policies that reflect how people are shopping today. Traditional retailers like Zara, H&M and Lululemon understand this as well and have special online-only catalogs to cater to the growing shifts in consumer behavior.
Our survey found that shoppers are less loyal to brands that don’t provide swift and simple returns. A whopping 77% of shoppers said they’re less likely to buy from a brand following a negative delivery experience, and 74% feel that a strict return policy negatively impacts their desire to shop with a retailer. While strengthening the post-purchase experience is crucial for brands, retailers don’t necessarily need to always eat the cost of delivery and returns. An earlier survey we conducted with returns management app Loop found that 60% of consumers are willing to pay $4 or more for at-home return pickups. This shows that the driving factor behind the shift in consumer behavior isn’t necessarily cost—it’s the comfort of shopping and trying out products from home.
In the new era of ecommerce, the customer experience (and customer lifetime value) matters more than ever
Retailers need to think holistically about the customer experience to bridge the gap between the convenience that customers demand and the need to lower costs to stay competitive. Instead of thinking about cost reduction as the only way to improve profitability, retailers must also prioritize customer lifetime value as a key driver to improve their bottom line.
The market is jam-packed and consumers are inundated with countless marketing campaigns from an endless stream of brands. Retailers should stop chasing one-time purchases and instead look to develop strong brand loyalty with their audience so they can increase the overall value of their core consumer base. It’s not enough to have a great product or service. Shoppers remember—and return to—brands that provide a stellar experience, from start to finish. In the years ahead, the path to higher overall profitability will be a grateful core customer base that keeps coming back.
The post-purchase experience is key to cultivating brand loyalty and repeat purchases. Delivery must be swift and seamless in a way that puts customers in control, and if something goes wrong, retailers need to make it right or risk losing that customer forever. Shoppers have no patience for brands that won’t take responsibility for a negative customer experience: 53% of respondents in our survey said they blame the brand they shopped from, in addition to the delivery company, when a delivery is late or missing.
Customer lifetime value is a crucial metric here because revenue loss on returns will be made up for if consumers are loyal to your brand thanks to a fantastic customer experience. Retailers who offer convenient returns stand to win both customers and future revenue: Our survey found that nearly half of respondents (49.2%) said they would be more likely to shop with a brand that offers doorstep returns such as no packaging or printed label required.
Shoppers aren’t fickle or asking for too much. The truth of the matter is that shipping is the new shopping. Profitability is always the most important metric, but what retailers have to understand is that unless they accommodate consumer desires for a seamless post-purchase experience, they’ll lose out on a huge swath of the overall consumer base. In the Amazon era and beyond, retailers who cut costs by gutting the online customer experience may win the battle—but in years to come, they’ll lose the war.
Itamar Zur is the CEO of Veho.