The women's apparel company has cut return costs and increased conversion after partnering with the returns management vendor for its physical drop-off points.

Draper James, a Southern-inspired women’s clothing retailer founded by actress Reese Witherspoon, used to have an “excruciatingly painful” returns process.

Packages took a long time to get back to the warehouse and an even longer time to get processed when the retailer was working with prior fulfillment and warehousing services, said Helen Nightingale, the retailer’s director of ecommerce, at the Internet Retailer Conference and Exhibition @ RetailX in Chicago in June. The delay was a huge burden for Draper James’ customer care team, which was inundated with requests for return status updates and “Why is it taking so long?” complaints at a time when the company was growing.

“Obviously no one wants to enter into this process thinking, ‘I hope our customers make a return,'” Nightingale said. “I want them to have a good experience with the product. I want them to keep it in their hands and love it forever.”

But she came to realize that a customer making a return isn’t inherently a negative for the company, and the data backed her up. Customers who order from Draper James and have made a return historically shop with the brand 25% more frequently than those who haven’t sent an item back to the retailer.

With the goal of boosting that order frequency even more, Nightingale sought to streamline the returns process so that Draper James customers weren’t stuck with the hassle of printing labels, taping up boxes, standing in line at FedEx or the post office and waiting for a refund. This was especially important because many of the brand’s shoppers are older and are wary of ecommerce since they haven’t been buying online for the entirety of their adult lives, she said. According to 2018 data from traffic analysis firm SimilarWeb, 58.6% of visitors to DraperJames.com were over 34.

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The ‘massive’ returns problem

Enter Happy Returns. The return management vendor aims to simplify returns for customers and minimize costs for online retailers without a physical presence or with a limited number of stores, such as Draper James, which operates four shops in the South. Happy Returns operates 400 “return bar” locations in 78 metropolitan areas nationwide for an in-person return and immediate refund. Retail chains like Paper Source and even independent boutiques house these return hubs for online retailers, which in turn, drives foot traffic to the store partners.

Over the next 12 to 18 months, its return bar network will grow to cover the bulk of the country, said David Sobie, co-founder and CEO of Happy Returns. The vendor will operate over 600 return bars by the end of this summer and plans to have 1,000 by the end of the year, he added.

Draper James in January began working with Happy Returns, which already had relationships with a number of other web-based retailers limited by their small brick-and-mortar footprint including Everlane Inc. (No. 294 in the 2019 Internet Retailer Top 1000), Revolve Group Inc. (No. 119) and Eloquii (acquired by No. 3 Walmart Inc.).

Offering a simple returns process is important to web-only merchants because they often have return rates of 15% to 40%–three to four times higher than physical stores at 5% to 10%, Sobie said.

“It’s a massive problem, and it’s only getting worse. People shop differently online,” he said. Online shoppers can’t interact with a product the same way they would in person, such as trying the product on or touching the garment and seeing the color in person. “Shoppers compensate and they often buy multiple sizes or colors and have a natural expectation when they check out that many of the items they buy may be coming back.”

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According to an October 2017 Forrester Research study commissioned by Happy Returns, 73% of shoppers said the return experience is their least favorite part of shopping online. That compares with just 15% of respondents who said waiting for the initial delivery of the order is the worst part of the process. The magnitude of the returns issue versus all other factors that round out the ecommerce experience was startling, Sobie said.

“When you think about all the time and all the money and all the energy that’s gone into delivery over the last five years, that’s largely a solved problem,” he said. “Whereas returns hasn’t seen the same kind of innovation or investment. It’s still a major challenge for any retailer and their customer.”

Happy Returns aims to reduce the cost of returns for retailers in two main ways: First, there’s what he calls the aggregation benefit of taking what previously would have been individual shopper’s boxes going back to each respective warehouse separately and “co-mingling” the in-person returns of multiple shoppers across retailers into a condensed shipment, cutting down on price-per-unit shipping fees. Once the Happy Returns distribution center receives the co-mingled shipments from the return bars, items are sorted by retailer and processed (i.e. inspected for its condition, folded, bagged and labeled for resale) before sending products back to retailers in cheaper batches.

Additionally, by issuing instant refunds with an in-person return drop off, shoppers have confirmation that their item has been received and get an emailed receipt, so customer service calls about the status of returns taper off, and agents can spend more time facilitating sales and exchanges, Sobie said.

Draper James’ success: Increasing order frequency

When Nightingale began initial talks with Happy Returns, the vendor told her she could expect around a quarter of her customers would start using the in-person return option based on some of their benchmarks for similar brands.

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“I was like a little skeptical in a very healthy, supportive way,” Nightingale said. “I thought this was a little ambitious. This model isn’t something that broadly exists, so I just thought there was going to be a little bit of a ramp up in adoption rate.”

Given her worry that Happy Returns was over-promising, she built the company’s financial model around the assumption that 10% of Draper James customers would actually make the trek to a return bar. But since day 1, 30% of customers who are returning an item have chosen the in-person return option, Nightingale said. And since the cost savings associated with aggregated return shipments increases as a greater number of customers utilize return bars, Draper James has recouped more dollars than it anticipated, although she declined to provide specifics.

Additionally, Nightingale said the retailer’s conversion rate and order frequency have increased since the Happy Returns partnership launched. But she added that it’s hard to isolate just one variable that’s having an impact on key performance metrics since Draper James couldn’t, in fairness, offer one return policy to one set of customers and another to a second group for testing. Plus so many levers are being pulled in retail at a given time that it becomes impossible to determine causation, Nightingale added.

The Draper James executive also pointed to a flood of positive customer feedback since it implemented Happy Returns, with one Seattle shopper saying the brand beats out Nordstrom Inc. (No. 18) for painless returns and that the process makes her want to purchase again from the brand in the future.

This is just what Sobie wants to hear.

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“It’s counterintuitive, but making returns easier is actually great for the lifetime value of your customer.” Sobie said.

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