Reducing costs is a must for retail businesses seeking to increase profit margins, and one valuable area where retailers can reevaluate their operations to reduce these costs is returns.
Returns are a major cost driver in the retail industry. In fact, the average rate of eCommerce return is 18.1%. Moreover, when consumers decide to return a product, Shopify merchants must pay for the processing, inspection, and restocking of returned goods, which can cost up to 21% of the item's original value. This is why return reports are crucial for retailers; these reports allow merchants to constantly monitor their Shopify returns. And, when used strategically, these Shopify reports also help merchants find opportunities to significantly decrease their return rates and ultimately increase their overall profit margin.
Let’s take a closer look at the Shopify return report, what they are, and how Shopify retailers can utilize these to help increase their profit margin.
Understanding the Return Report
Customers may return an item for any number of reasons, whether it’s because they changed their mind, the item was defective, the item was the wrong size, or the item otherwise didn’t work out for the customer. When a customer returns an item, the retailer has to be prepared to not only receive and restock the item but also understand what went wrong so that they can take appropriate steps to minimize the chance of it happening again. To do this, merchants can use Shopify reports to analyze the data collected on these returns.
Through the return report, merchants can view Shopify returns data in several dimensions. Let’s break down these dimensions and how they help the retailer:
1. Monthly Sales by City and State
Sometimes, merchants receive more Shopify return requests from one region than another. One potential cause of this is the mishandling of orders by the 3PL (third-party logistics) team in that region, resulting in order delays or damaged goods.
Merchants can use the Returns by City and State reports in Shopify to get another view into this problem as well. This report provides a detailed breakdown of the causes of eCommerce returns made by each geographical area. With this report, it’s easier to see which regions have made the most-or least-returns. After identifying regions with more return requests, merchants can work to resolve these problems.
2. Monthly Returns by Order
The Monthly Returns by Order report gives merchants another look into this same dataset. In this view, merchants can view a list of all orders for which returns were processed. They can also see the monthly total refunded amount. This Shopify returns report provides additional insight into return patterns and gives merchants a handy summary of all returns processed within a month.
3. Monthly Return Rate
Return requests are placed for a number of reasons, such as customer dissatisfaction, improper fit, or it otherwise does not meet the customer’s expectations. The merchant’s goal is always to reduce the number of returns to avoid incurring additional, sometimes unnecessary costs. Monthly return rates can help provide some insight into this customer data and help inform merchant decisions.
In this Shopify returns report, each product is quantified by a return rate. In this view, merchants are then able to compare return rates across product styles to determine which values are the highest and lowest. The Return rate report provides a detailed breakdown of returned sales against shipped sales of the category and style of products. After reviewing this data, merchants can determine the reason for the high returns, diagnose the issue, and take the necessary steps to remediate it.
4. Appeasement by Item Level
Appeasements occur when a retailer refunds an order without receiving the returned item. When merchants make appeasements, they bear costs on two grounds: the refunded amount and the unreturned items. As a result, merchants want to reduce the number of appeasements issued by improving the product delivery experience. Merchants always want to track appeasements given to customers. This process assists merchants in analyzing their efforts to reduce the most occurring appeasement reasons.
The appeasement by item level return report provides a detailed breakdown of the appeasement issued in the previous month. Merchants can quickly view the amount of—as well as the reason for—appeasement against each item using this Shopify returns report. This report assists merchants in staying on top of customer appeasement and optimize the process to reduce appeasement accordingly.
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Retail return reports for Shopify help merchants understand the reasons for Shopify returns and spot any potential problems increasing their return rates. Once identified, merchants can work to reduce returns significantly.
HotWax Commerce downloads all sales orders and completed returns from Shopify. HotWax Commerce provides reporting and analytics modules for analyzing Shopify sales, demand, and returns. Every Shopify report mentioned in this blog is readily available in HotWax Commerce. These reports can help Shopify merchants gain a thorough understanding of their processes, identify bottlenecks, and reduce return rates.