In the world of ecommerce, there are two types of customer personas: High-Sales Harper and Low-Returner Riley. Two shoppers from two ends of the retail spectrum. Harper is a very profitable customer, and Riley is not. Both customers are important, but retailers that engage in AI-powered, behavior-based return authorization systems versus a traditional, rigid rules policy on returns can have a dramatic impact on their customer loyalty.
AI-driven return authorization systems rely on predictive analytics and statistical models to distinguish and deter fraudulent return behavior in-store, online, or in the call center. Our report on consumer returns reveals that around 10% of returns are fraudulent. AI-driven data and analytics can help retailers reduce losses. The technology can also have a positive impact on your most valuable customers.
REDUCING ECOMMERCE RETURNS
High-Sales Harper buys a lot. In the ecommerce realm, Harper has an undeniable penchant for the latest trends and the convenience of online shopping. As a result, Harper frequently returns products, averaging a substantial $1,282 worth of returns each year. Retailers cherish high-spend customers for their loyalty, but the returns pose a challenge.
AI-driven return authorization can help limit Harper’s ecommerce returns by issuing warnings for specific behaviors. The fear is it will deter shopping altogether, but the reality is Harper’s purchasing behavior remains unchanged. In fact, Appriss Retail research shows that a shopper’s return amounts decrease significantly by a remarkable 83% when issued a warning. The AI-powered system actually helps create a happier and more considerate shopper, thanks to AI's gentle guidance.
Now, on to the other side of ecommerce, where the bottom 1% of shoppers, by volume, reside. Low-Returner Riley spends roughly half of what Harper spends and returns products worth just $11 annually.
Riley’s behavior has caused the retailer to implement a cost-cutting measure , and the retailer shifts from the AI-driven model to rigid rules. These rules might include “no receipt, no return policies” or fees for returns made online. The retailer also can’t leverage AI to know more about the shopper, offer incentives, and reduce fraudulent returns. Now, customers like Riley begin to complain — and the complaints soar by a staggering 400%. Even among low-volume shoppers, a rigid return policy can cost more money down the road and lead to more customer dissatisfaction. And the bigger concern is upsetting a shopper like Harper.
In fact, looking at Harper versus, Riley, the top 20% of a retailer’s customers are expected to generate returns that can be up to 23x times higher than those of the bottom 1%. Depending on the retailer, the top 20% of customers will have an average annual return amount between $200 and $1,500.
AI-driven return authorization is the hero that keeps high-value customers like Harper happy and prevents a flood of complaints.
The moral of the story: Retailers need AI-driven return authorization
Ecommerce and omnichannel sales have driven retail revenue to $4.6 trillion (about $14,000 per person in the U.S.) in 2022, with projections indicating continued growth. However, this growth has led to a significant rise in returns, reaching $816 billion (about $2,500 per person in the U.S.) last year. Of these returns, 10.4% were fraudulent, amounting to $84.8 billion.
In ecommerce, one thing becomes clear: AI-driven return authorization is the hero that keeps high-value customers like Harper happy and prevents a flood of complaints. High-sales customers, with the help of AI, can find a way to maintain loyalty while becoming more mindful shoppers. On the flip side, retailers who abandon AI in favor of strict rules will find themselves drowning in customer complaints, ultimately hurting their bottom line.
AI-driven return authorization can guide retailers towards a future where high-value customers thrive, and customer satisfaction remains at its peak. Embrace the power of AI, and let it shape your retail success story. Your customers and your bottom line will thank you for it.
Leslie Nienaber, Digital Marketing Manager, Appriss Retail
Leslie researches business trends and distills the information for a retail audience. Her marketing experience has covered a wide variety of industries, including promotional products, microbiology, print, and mail. She spent five years in the retail industry before graduating with her Bachelors in Business Administration from John Carroll University.