The End of Lenient Return Policies

Elite Customer Service has been a major priority of online retailers for quite some time now. Brands bend over backward to avoid any negative press or bad word of mouth since both carry so much weight in the eCommerce space. They will stretch their resources to maintain customer loyalty and ensure the transaction goes as smoothly as possible. Return rates for online retailers can be up to 4x as much as in brick and mortar sales. Customers expect generous return policies and they are not afraid to take advantage of said generosity.

Liberal return policies are implemented to increase conversions by reducing consumer uncertainty. A customer that is dubious about a possible purchase can rest easy knowing that a return would be free and simple if they do not enjoy the product as advertised. This strategy worked exceptionally well early on but the combination of increased growth, increased sales, free shipping, and free returns is a recipe for disaster for company margins long term.

Brands are becoming increasingly cognizant of the idea that free returns are hurting more than they are helping. Returns hit $400 billion in 2017 (the equivalent of roughly 1 month of all U.S. retail sales). As margins thin, retailers have explored solutions to resolve the returns issue sweeping the eCommerce world. Some companies have implored customers wishing to make a return to pay for their own return shipping. Others have adopted a more aggressive strategy.

Amazon announced it would institute a lifetime ban for “serial returners”. The qualification for this term is unclear for the time being but shoppers should be aware that the policy exists and should refrain from abusing the system. Amazon has also introduced over 600 brick and mortar locations to serve as accessible locations for customers to return packages and reduce the cost of returns. This compromise gives consumers the ability to purchase products, see the products in person,  evaluate if a return is needed, and execute the return at a reduced cost for Amazon. Purchasing power for the consumer remains near constant.

Smaller retailers will struggle to mimic a policy similar to this since very few online sellers are comparable to the Seattle based giant. Implementing changes in policy while maintaining customer loyalty and satisfaction is a tall task to order but must be done to ensure long-term growth. Some companies have begun offering discounts to consumers that purchase online but pick up in store. This serves two purposes: eliminates the cost of shipping and it gives the customer a chance to see the product in person before leaving the store with it. This will reduce the chance of the customer experiencing buyer’s remorse.

Brands will look to reevaluate their return policies and customers should be ready to read the fine print before checkout.

Marketplace Mania

Unless you have been living under a rock for the past decade, the vast majority of people have had an experience with Amazon in one fashion or another. Amazon has transformed the way we browse and shop online. They have streamlined the buying and shipping process making it as efficient as possible. Their new strategy has propelled them to an industry leader and one of the largest companies in the world.

Amazon’s businesses strategy has been so impactful that retail sales have suffered a critical hit. Consequently, many major retailers like Walmart (Canada), Best Buy (Canada), Target, and more are looking to mimic the model of Amazon by creating their own marketplace of products.

Some of the benefits of setting up a designated marketplace for your business include capturing increased revenue, offering a wider selection of products and SKUs, and solidify customer loyalty.

walmart market place application

 

Larger brands that operate their own marketplace add a plethora of resources to be at their disposal. They are able to conduct market research and test products before constituting a nationwide rollout. This reduces risk and gives greater insight into consumer buying behaviors, wants, and needs. Demand can be measured for different SKUs of product lines by gauging consumer interest. Selling directly through a dedicated marketplace eliminates any commission fees you may have had to pay in the past to the host platform.

Marketplaces reinforce brand loyalty by providing a “one-stop shop” for customers to browse and make purchases. This will enhance their customers’ shopping experiences by providing multiple, complementary products and services on a single website (or PWA).  A more complete buying experience will increase time consumers spend browsing and shopping on the marketplace, turning into more conversions, which results in a greater bottom line.

Social Media Shopping 2.0

Instagram

It is rather common knowledge that social media has revolutionized the way we receive content, interpret the information, and conduct ourselves thereafter. Social norms and buying behaviors have been altered substantially with the introduction of social networks like Instagram, Snapchat, and Facebook.

Each platform is approaching the transactional side of social media a bit differently but maintain a similar vision. The networks want to capitalize on their customer base and brand loyalty but implementing shopping features to add new revenue streams to the business model.

Thousands of brands currently use Instagram to promote their products via their pages and Ads. Instagram Shopping has existed for many months now. Currently, brands can embed prices and descriptions to hover over products that are available in Instagram posts. This allows customers to see something they like, click on it, and instantly receive some pertinent information on pricing and where to purchase it.

instagram shopping

 

However, users lacked the ability to checkout directly through the Instagram platform. In order to improve the buying process, Instagram is rumored to be working on a fully-shoppable app with a  native payments feature. Adding native payments is the most important step to increase conversions on the app.

There is great potential for brands to capture revenue and market share through social media. Many brands have already created empires directly through marketing campaigns via Instagram.

Here are some tips directly from Instagram on how to get started setting up your visual store:

Tips for shopping posts

  1. Create at least one shopping post in the feed to activate the “Shop” tab on your business profile

  2. Feature more than one product in your posts for higher engagement—while not overcrowding with tags

  3. Leverage different shopping formats in feed; tag a single image/video or create a carousel with both static and video content

Tips for shopping in stories

  1. Customize the text color on product stickers to complement your visual creative

  2. Try using product stickers in stories for your product launches or sales announcements

  3. Keep the product as the focal point in videos when using a product sticker

A complete guide to setting up your Instagram store can be found here

Snapchat

Snapchat introduced its very own shopping channel that can be found in the discovery section of the application. Coining it “Shop and Cop”, this marketplace offers a limited selection of products ranging from beauty products to apparel. Snapchatters are able to browse and checkout natively through the app.

Unlike Instagram, this feature is designed for short-term deals and sales rather than permanent postings like you may find on a traditional website. Flash deals can impulse consumers through sexy products, good deals, and an easy checkout process.

“Shop and Cop” was introduced to offer uses a variety of Black Friday deals as a test run. Since then, additional products and brands have been added.

 

As Snapchat and Instagram compete for market share, look for both companies to allocate major resources to improve their shopping experiences in 2019.

Progressive Web Apps

Each day mobile checkout becomes increasingly prominent in the eCommerce world. Users are spending more time browsing and shopping on mobile devices because of convenience and efficiency. Implementing a clean mobile site or app that allows for native checkout eliminates the need to browse on a desktop. Consumers have become comfortable making purchases through a mobile device and are looking for the next step to improve the process further.

progressive web apps

Progressive Web Apps or PWAs look to reshape the way we use our mobile devices to shop. In the past, companies developed applications or APPs to promote their brand, services, or products and the goal was to gain as many users to download the app as possible. Brands have moved away from the development of traditional mobile sites or mobile applications and rather have shifted their attention to creating a hybrid solution. PWA’s combine the upside of both traditional options but improve on many key features as well.

PWA Features:

  • Load 2 – 10 times faster than mobile sites
  • Offline capability
  • Can be added to a home screen without ever requiring updating
  • Allow push notifications

Providing an app-like experience via the mobile web gives users all functionality that would be included in the app. In addition, PWAs are more accessible than traditional apps since the extra steps of searching the app store and downloading the app are eliminated. Users spend most of their time in native apps, but mobile web reach is almost three times that of native apps.  There is no need to promote or market a separate application to consumers since the PWA is an app and mobile site in one.

Google enlisted this set of criteria to qualify PWAs:

  • Progressive – Works for every user, regardless of browser choice because it’s built with progressive enhancement as a core tenet.
  • Responsive – Fits any form factor: desktop, mobile, tablet, or whatever is next.
  • Connectivity independent – Enhanced with service workers to work offline or on low-quality networks.
  • App-like – Feels like an app, because the app shell model separates the application functionality from application content.
  • Fresh – Always up-to-date thanks to the service worker update process.
  • Safe – Served via HTTPS to prevent snooping and to ensure content hasn’t been tampered with.
  • Discoverable – Is identifiable as an “application” thanks to W3C manifest and service worker registration scope, allowing search engines to find it.
  • Re-engageable – Makes re-engagement easy through features like push notifications.
  • Installable – Allows users to add apps they find most useful to their home screen without the hassle of an app store.
  • Linkable – Easily share the application via URL, does not require complex installation.

For more information on PWAs and the benefits they can have on your business, check out Trellis’ CEO Isaiah Bollinger’s take on the topic here. 

The Tax-Free Days are Over

The June 21st Supreme Court decision of SOUTH DAKOTA v. WAYFAIR reached a verdict in favor of South Dakota’s attempt to eliminate tax-free retail sales via the internet. Before the announcement, states only collected sales tax from online retailers if said retailer had a physical presence via storefront, factory, warehouse, or any location with employees within the state lines.

In layman’s terms, a company centralized in North Carolina may now be required to collect sales tax on transactions that send their products to locations outside of the state’s borders.   The collection of this tax is solely dependent on the state to collect and pursue and each of the 50 states will approach this differently. The ruling gives the states flexibility and charges to increase tax revenue but it comes at a cost to consumers and online sellers.

Over half of the 50 states in the US have announced they will collect sales tax on online transactions in 2019. This is noteworthy for merchants and consumers alike.

This issue may become pressing for businesses with resource restrictions. Each state has a different tax code, some are more complex than others, but the pertinent issue is that they are all different.  Smaller online businesses will struggle to understand how each state’s code operates and how to implement and integrate the respective code into their eCommerce shops or business models.

B2C and B2B retailers will need to determine which taxes apply to which clients, regions, or products. The next step is to calculate and charge specific sales tax on their online sales and ensure the respective taxes are remitted to agencies or the state. This is a tall task to ask of any sized business since tax compliance is such a complicated issue.

Some good news for these online sellers is that not every state plans to pursue these new tax restrictions and the ones that do will take months to implement. There are also tax compliance companies out there such as Vertex and Avalara that can help guide your business to understand the complex and changing world of tax. Their industry-leading automated solutions can eliminate many of the headaches that this ruling brings about to your online business. Their software can automatically identify tax compliance codes for each transaction based off of the customer’s shipping address. This can simplify the transition many businesses face in the coming months, but it certainly does not eliminate it.

tax calculator

 

Amazon is currently one of the only major online retailers that have collected and remitted sales tax over the past few years. Besides that, consumers are used to paying 0% sales tax on online purchases. 2019 will eliminate the competitive advantage for many companies that sell online since they will be forced to charge the customer up to 10% (rate varies by state) of the total price without any added benefit to the product or service. This reduces consumer purchasing power and could reduce sales volume and revenue over time.

Consumer buying patterns will shift in 2019. Retailers should make it known to their audiences and customer bases of the changes so they can adjust slowly. Customers do not like enjoy being surprised with additional costs especially when there is no benefit attached.

Here are some tips for online retailers to get ahead of the curve and keep customers happy:

  • Gather data on product SKUs, transaction count, and revenue in each location you sell to remotely
  • Prioritize states where the company has the greatest  presence
  • Create a plan to collect and remit sales tax in said states
    • This can be done through your marketplace, or with a hosted, or cloud-based technology solution
  • Inform your team of the ruling
  • Strategize how to process this decision and evaluate the impact it will have on your finances
  • Brief your customers preemptively upon possible changes to your site

 

What do you and your business expect from 2019? Let’s discuss in the comments below…

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