However from an operational level, they looked at their returns data, they realized the growing volume of returns, policy abuse, fraud, rising costs of goods due to inflation, sales regression, and honestly just changes in shopper behavior.
Their margins were taking too big of a hit and they had to find some sort of solution to deter this behavior.
So, they also said, with these changes, more people moving forward are gonna be inclined to return things in stores because it’s ultimately cheaper. So they wanted to find something that will promote that behavior.
Now, the immediate reaction from a lot of analysts and others was that this is gonna backfire. It’s going to impact customer loyalty. And that very well may be true.
But I imagine someone at Zara probably concluded that it was more profitable to focus on protecting their margins instead of making returns too shopper friendly.
I do have another example. This one’s more anecdotal and, you know, it won’t be in the news but it’s still super interesting. And ultimately, this is where the whole topic of the podcast really came from.
So I was talking to a shoe company the other day, and I’m not going to name drop here, but such an interesting problem that they brought up.
They noticed that shoppers basically discovered a loophole where they could order three pairs of shoes, request a refund on all three, and then only returned two.
The warehouse team was none the wiser, or if they did, they couldn’t do much about it. They couldn’t edit the original order. So this process, this problem became like a cancer in their business.
They introduced
automation. They made things easier. But now they really introduced a problem that was just metastasizing in their business and they had no idea about it.
So this process went on and on, cut into their profits, screwed up their inventory, screwed up accounting. Ultimately, they have to spend weeks reconciling all this. They even had to pay somebody to come on full-time to reconcile all the issues that came from this.
However once they’re able to automate returns and give every team member visibility into the returns process, they were able to figure out why returns were coming back and they used that data to optimize returns processes.
And that’s what led to their formula for post-purchase excellency.
So all in all, my consensus is that obviously making returns easy for shoppers is this huge. That’s table stakes. But, if that’s more important to you than focusing on operations and making returns easier to process on the back end, your margins will suffer and you won’t be as successful.
Every return policy and retailer is different, and they have to know what to measure or what to look for in order to help them make these decisions.
So like whether or not they should offer free return shipping, exactly what’s Zara grappled with.
I don’t think it’s fair to tell every retailer in the world the focus on making returns easiest possible for shoppers. It’s really a balancing act.
There has to be a balance to it.
Merchants have to ask themselves and ultimately decide if focusing on shopper experience or merchant experiences more profitable for whatever stage they’re in as a business.
That’s just my two cents. Travis, what do you think?
