Loop CEO Says Returns Experience Now Drives Brand Loyalty

It’s nothing new, customers expect a straightforward and no-cost returns process. The option to change their minds about an item or rectify their dissatisfaction without paying extra is considered essential. This expectation has become widespread, making free returns a standard practice in the industry. Consumers seek out retailers that offer this service.

However, the economic landscape has put pressure on retailers to reevaluate their return policies. Rising costs for shipping, processing and handling make it challenging for them to absorb the expense of free returns. Some companies are being forced to charge for returns  that were once free.

This change in return policies has not gone unnoticed by consumers.

In an interview with PYMNTS, Loop Return’s CEO, Jonathan Poma delved into the current state of returns. He also discussed the  considerations for retailers to regain their costs.

“If you want to charge you better be damn sure you’re delivering an exceptional returns experience and exceptional purchase experience,” Poma said.

The sentiment follows the news earlier this month that Loop Returns has been chosen by the buy now, pay later (BNPL) company Affirm as its primary solution for handling returns. This comes after Affirm acquired Returnly in 2021 to provide shoppers with a self-service online returns experience before ultimately phasing it out.

Read more: Affirm Sunsets Returnly and Directs Merchants Use Loop

The partnership will reportedly bring together over 1,500 merchants who are using Returnly with the 2,200 merchants already on the Loop platform.

But how did we start to associate an exceptional purchase experience with a returns experience?

A Little Free Shipping History

Poma discussed a trend driving returns in the eCommerce industry. During the rapid growth of eCommerce, merchants focused on scaling and market capture, often overlooking return-related unit economics. To drive growth, free shipping and free returns became a part of the deal.

The desire for free shipping among online shoppers has steadily increased since Amazon launched its Prime membership in 2005, which provided unlimited two-day shipping for an annual fee. Walmart also introduced a subscription service that offers free delivery.

Read also: Walmart Launches Curbside Returns, Walmart+ Return Pickup From Home

In order to stay competitive and boost customer spending, retailers have embraced free shipping. According to a study by PYMNTS and sticky.io, “Subscription Commerce Readiness Report: The Loyalty Factor,” 42% of respondents said that if free shipping was discontinued, it would be a compelling reason for them to cancel their retail product subscriptions. This percentage surpassed the proportion of respondents who cited any other reasons for canceling their subscriptions.

Read more: 42% of Retail Subscribers May Bail if Merchants Ditch Free Shipping

However, over the past few years, a shift has taken place. More merchants are now opting to charge for exchanges, refunds and store credit. In fact, Poma noted that 57% of merchants have reportedly imposed some type of return fee. This shift comes in response to the statistic that customers in the U.S. return around 3.5 billion products annually, with only 20% of those items being defective.

Surprisingly, according to Poma, this change in pricing hasn’t led to a shift in shopper behavior as customers understand the merchants’ need to recoup costs and are willing to pay for returns as long as they receive an exceptional returns and purchase experience.

“I think there’s like a quid pro quo that is, ‘Hey, as long as I’m getting a great experience, I don’t mind paying,’” Poma said.

Decline in Bracketing

So, if consumers are still buying at the same rate, are they still acquiring multiple variants of the same item only to return them later? Not exactly.

Bracketing refers to the practice of shoppers buying multiple variants or items from a category, intending to return all but one.

According to Poma, Loop Returns has observed a change in consumer behavior. Shoppers has less interest in bracketing, as they are prepared to pay for return fees but not necessarily eager to do so. Instead, they prefer buying items they are confident they will keep.

Poma noted that the decline in consumer cash flow is influencing purchasing decisions, especially for items with higher upfront costs.

To illustrate, Poma cited the example of swimsuits priced at $120, where consumers may need to allocate $480 to try out four different swimsuits. He said that this financial burden can significantly vary between households and consumers, with some able to manage such expenses while others may find it challenging.

But while consumers are being more conscious and mindful about how they spend, returns are still inevitable.

Returns Build Loyalty

Although it may appear counterintuitive, focusing on returns as a loyalty driver can enhance a brand’s reputation. A well-designed and hassle-free returns process carries multiple benefits.

First, when a brand offers a seamless returns process, it sends a strong signal of confidence in the quality and reliability of their products.

Secondly, a seamless returns process demonstrates the brand’s dedication to its customers’ needs and convenience, strengthening the bond between the brand and its clientele.

Lastly, in the age of online shopping, customers often face uncertainties about their purchases, such as differences in appearance, size or functionality. By providing a straightforward returns process, the brand helps mitigate this risk, as customers feel reassured that they can easily return or exchange products without any complications.

Future of Returns: Personalization

Looking ahead, Poma envisions a future where returns policies will be personalized, taking into account the value and potential of individual customers. This personalization aligns with the trend seen in various facets of eCommerce.

According to Poma, the trajectory of returns will veer away from the traditional global, one-size-fits-all approach, paving the way for a more tailored and personalized experience through the use of data from warehouses and third-party logistics providers to optimize the returns process.

Poma said the returns triage process involves manual and error-prone tasks carried out by warehouse associates. However, by seamlessly integrating this data into their software, Poma envisions streamlining the routing process and handling returns in a more personalized and efficient manner.