Harnessing Returns as a Retention Tool & Revenue Driver with ReturnKey
Returning an online purchase is a total hassle, both from the consumer and from the brand point of view. But with ReturnKey, it doesn’t have to be. The returns management software, founded by Dalton Fouts, is designed to make returns better for everyone.
We chatted with Dalton about launching ReturnKey, the rapidly evolving Southeast Asian digital commerce ecosystem, and how returns can actually boost brand metrics across the board.
“If executed right, world-class returns experiences can reduce operational costs and increase top-line revenue by immediately converting a refund into an exchange or repurchase opportunity.”
The Art and Science of World-Class Returns
With his previous experience working in logistics, Dalton joined Ninja Van, Southeast Asia’s fastest growing last-mile logistics startup, in 2016. During his time scaling up the growth function at Ninja Van, he notes that the business radically changed every time it grew by 3x.
From hiring your first dozen employees to building a team of one hundred, the way you approach operations and management requires additional layers of insight and accountability. As the business grew more and more complex every 3x growth cycle, returns became a key lever for Ninja Van to cut through the noise and deliver consistently world-class customer experiences.
In the last 5 years alone, Dalton points out the major shift within the logistics ecosystem in Southeast Asia: companies are finally starting to understand the importance of data. More importantly, companies are coming to terms with how analytics can better inform each step in the value chain and yield compounding improvements in driving efficiency gains.
In leveraging this data, Dalton was able to nail the art and science of helping brands figure out what to do when an item gets returned. ReturnKey, at its core, focuses on making returns more efficient, profitable, and sustainable for all parties involved.
“Even though returns are inevitable for brands, they don’t have to be painful. That’s precisely why ReturnKey exists, and why we’re here to help.”
The Outsized Opportunity in DTC Returns
20% of all goods bought online get returned, and that number shoots up to 30% when it comes to fashion and even higher-value items like luxury goods and high-end furniture. Now more than ever, consumers will immediately expect a white-glove return experience from digital brands.
Global consumers, irrespective of geography, are becoming more astute customers, and they want the same experience they’d expect if they purchased from a local department store.
ReturnKey’s value proposition centers around its ability to transform returns from one of the most painful parts of a customer’s engagement with a brand into a positive opportunity to demonstrate enduring brand values, 1-on-1 CX engagement, and new catalog rollouts.
On the ReturnKey portal, as soon as a consumer clicks the return reason, they’re presented with the appropriate outcome. Through this channel, a process that previously required hours of back and forth between a consumer and a CS agent has been quickly shifted into a few simple clicks.
Finally, the opportunity that ReturnKey is chasing is particularly compelling due to its flexible use case. Put simply, its technology can be used for any type of product with infinite SKU variants.
“Most brands view returns as a cost center for their company. Instead, they should reframe returns as a lever to improve customer retention as well as customer acquisition by giving first time buyers the confidence to add a new item to their carts.”
Value Drivers and Maximizing LTV
Before diving into the data, Dalton notes that so many retailers haven’t even taken the first step, which is actually formalizing their return policy. ReturnKey sits down with brands and will ask, “How can we take your stodgy return policy and turn it into a core revenue-driving experience?”
In his words, when a customer churns, it’s much more expensive to try and convince them to shop with the brand again than it is to acquire them in the first place. For ReturnKey, it’s all about extending customer lifetime value and tracking that data point as a North Star metric.
Dalton notes that brands not only need to track their return rate over specific cohorts and time periods, but they also need to recognize that exchanges are a subset within return rate. They’re actually a form of positive engagement since the customer is still completing the sale.
Finally, in order to further extend LTV, ReturnKey tracks the per unit profitability of various SKUs. In turn, brands are forced to shift their thinking from GMV towards net merchandise value.
“Too many retailers view their return experience in a black box and refuse to evolve. The easiest place to start is to simply codify your return policy. From there, you’ll be able to make value-driving upgrades.”
The Rising Tide: Global eCom Ecosystems
According to Dalton, one of the most interesting distinctions between Southeast Asia and the U.S. are the operating platforms, in particular the large marketplaces. For example, in Southeast Asia, Shopee is the dominant shopping platform in the region, whereas in the U.S. Amazon is still dominant, but the long-tail of storefronts still drive the large majority of customer revenue.
Another notable distinction across the global commerce landscape is the varying quality of return experiences across different markets. In Singapore, Malaysia, and the Philippines, a 2-week no questions asked return policy is standard. In Indonesia, that’s not yet the case but is changing rapidly as more D2C brands take off throughout the country.
To summarize, while eCommerce penetration is scaling rapidly year over year around the globe, consumers in emerging markets increasingly expect the same “white glove” return experience that is already the norm across the US, China, and Europe. Thus, interesting learning and arbitrage opportunities arise.
“Returns are critical because they’re the most sensitive touchpoint with customers. The more bespoke experience you can offer via branded post-purchase portals the better. That’s where ReturnKey comes in.”
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