# Best practices for converting returns to exchanges - February 23, 2023 ### _How to leverage returns as an opportunity to save the sale_ 75% of retailers agree that returns are just a part of the business. But, unlike paying rent or advertising, which support the business, the cost of returns has a massive, negative impact. Last year, [returns cost retailers](https://nrf.com/research/2022-consumer-returns-retail-industry) over $800B in the US alone. $816 billion in lost retail sales from returns in 2022 according to NRF. Fortunately, this “necessary evil” isn’t the only option— exchanges can prove to be a much more sustainable and cost-effective alternative. Converting returns to exchanges can be a great competitive advantage, if executed properly. In order for this to be successful, the policies and associates need the right tools to support each other. If your policies benefit the customer and the associates are well-trained, but the process is convoluted, the overall experience will still suffer. Let’s look at some best practices retailers can use to convert returns to exchanges. ### **Coaching associates to save the sale** Converting returns to exchanges starts with the associate. Associates have the ability to engage with customers, understand where they’re coming from, and decide the best course of action for a purchase that didn’t meet the mark. There are 3 key components to getting it right: #### **Know your customer’s history** In order to effectively determine if they can save the sale, associates need to have a [holistic view of their customer](/content/connect/clienteling/index.html). This includes key insights such as purchase and return history and preferences for size, style, and color. Obtaining this information should be as easy as pressing a button. A customer comes in to return a pair of pants they bought online. From past purchases the associate can see this was traditionally a footwear customer, and because they’ve only bought shoes and a few tops, they may not know the fit of the brand’s pants. Knowing this can help the associate tailor their service for the rest of the interaction. 80% of consumers want personalization from retailers. #### **Ask specific questions** Asking the right questions is critical for determining the best course of action for a return. “Why are you returning this item?” should be the start of the conversation, not the end of it. Asking detailed follow-up questions helps associates understand the customer’s needs on a deeper level. Initially, the customer may say they’re returning the pants just because they didn’t fit how they wanted. But, after asking a few more questions they find out specifics on how their expectations fell flat— the legs are too short and the waist is too big. This information, along with the customer history, can help the associate dive into the next stage of diligence. #### **Make a personal recommendation** Being able to offer a tailored solution not only strengthens the connection with the customer, but may even help save the sale. In this case, the associate can suggest sizing down for a better fit on the waist and opting for tall sizing which has a longer inseam. Knowing the customer’s previous purchases and having a visual board of their closet can also help the associate upsell a pair of white sneakers that will go great with their new pants as well as a top they already own. By asking the right questions and truly listening to the customer, the associate is able to save the sale while providing the customer with a personal experience that will have them returning for more. ### **Writing a policy that encourages loyalty** Writing your return and exchange policy can be as unambiguous as setting a time window and requiring a receipt. But, that doesn’t take into account the intricacies of your customers, products, or you as a retailer. Return and exchange policies play a vital role in customer loyalty, associate outlook, and business success. So, they need to be constructed strategically. Retailers need to be looking at their policies as ways to save the sale by converting returns into exchanges. 97% of consumers would likely buy again after a positive return experience. There are several key factors that need to be considered: - **Who are your buyers?** Are they the same as your target audience? Are they typically first-timers or returning customers? - **What are your products?** Do your products need to be tested before they’re returned like cosmetics or sports equipment? Do you sell perishable items? Will they be able to be resold? - **What is your average inventory sell-through?** Do your items typically sell within 30 days of stocking? 60 days? Within a quarter? - **What are your vendors’ policies on re-ordering?** Are they flexible or is it a one-and-done? - **What are the return policies at your competitors like?** Would your customers switch to them if your policies don’t match up? Let’s see how one retailer used these questions to develop a policy that benefits the customers and the business by promoting exchanges when items don’t meet the mark. [L.L. Bean’s](https://www.businessinsider.com/how-to-return-ll-bean-items-after-policy-change-2018-2) one-year satisfaction guarantee return and exchange policy supports their active customer base well. With products like boots, tents, and insulated jackets, the brand draws in an audience of outdoorsy consumers who might only realize their backpack is too heavy after taking it out on a hike. With just proof of purchase, the backpack can then be exchanged for a lighter version, easy as that. ### **Equipping associates to make it happen** Once you’ve set a policy and trained your staff, you need to ensure you have the right tools to support them. No matter how flexible the policies are, or how personal the service is, if the process is agonizing, customers will be less likely to shop. The objective shouldn’t be to just get customers in and out, it needs to ensure that they become repeat shoppers by offering a frictionless experience. 89% of consumers are less likely to buy from a retailer after a bad experience with returns. There are 4 key characteristics you need to ensure: #### **The POS needs to accept omnichannel returns** Being able to accept online returns in-store needs to be the first step. If online customers are turned away as soon as they walk in the door, then there isn’t even an opportunity for the associate to save the sale. #### **The flow needs to be intuitive** Associates should be able to quickly access a customer’s purchase history from just their name, and the item(s) to return/exchange should be quickly identifiable from the customer’s prior transaction. Reasons for return/exchange should be quick to input and view so patterns can be quickly identified and addressed. #### **The catalog needs to be easily accessible** In order to make recommendations and upsell products for an exchange, associates need to be able to showcase items to the customer on-the-spot. Having the [full product catalog](/content/checkout/endless-aisle/index.html) at their fingertips helps keep the experience seamless. #### **The POS needs to be capable of placing online orders** To keep the exchange process flowing smoothly, associates need to be able to quickly and easily order replacement items within the same transaction on the POS. ### **Bringing it all together** While returns may just be a part of running a retail store, they don’t have to be detrimental to business. Properly training associates, strategically developing policies, and utilizing a [POS](/content/checkout/point-of-sale/index.html) with an intuitive, omnichannel workflow can help retailers save sales by converting returns to exchanges and creating loyal, repeat customers.