How To Reduce Ecommerce RTO In India?

As per Statista, in 2019, Indian eCommerce product returns on COD stood at 27%, and returns on prepaid orders were 12%. In 2020, the return on COD came down by 7%, whereas the return on prepaid orders decreased by a mere 1%. Instamojo says that currently, returns in India are fixed between 25–40%.

In order to replicate the experience of consumer with the products of local shops the E commerce giants are focussing to make the process hassle-free and consumer friendly but what is bothering them the most are returns not only do they incur hidden cost but a significant amount of profit is being lost due to them. There are reasons both customer and company dependent that contribute to the return numbers in India.

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What is RTO ?

The customer returned orders in Ecommerce are termed as RTO which stands for Return To Origin , where the non-deliverability of the order has to be shipped back to the warehouse and then to seller’s address. Now these RTOs if high causes a big dent on companies balance sheets. Here are some of the ways eCommerce companies can lose money with returned orders:

• Inventory getting blocked when orders are stuck in transit
• Excessive costs involved for both forward and reverse shipping.
• Repackaging of the returned products after manual quality checks.
• Extra operational costs required in processing every order even if they are returned or cancelled
• The probability of those products getting damaged or broken as they are shipped back and forth is very high.

How is RTO calculated :

Analysis of the Causes

Its true that we cannot bring down the RTO numbers to absolute ZERO but there are certain steps by which we can reduce it strikingly . The first being analysing the data and segmenting it broadly into 3 categories Customer , Product and Company dependent .

Customer Dependent

The ease of buying things online is considered not less than an adventure for many first time buyers which means that they have not yet made up their mind about what to expect from ecommerce websites. As a result, buyers sometimes fall prey to hard sell. But by the time the product is delivered, they demonstrate remorse and return the goods. It is the third biggest reason behind the returns . So segmentation of the return data according to the location/cities to find out which pin codes often lead to the most undelivered orders will help us customize the solution more effectively.

Product Dependent

Now going as per the graph above ,it is quite evident that the major portion of returns are product related. So we need to analyse and categorise data as per below criteria

1. Which products are received well by the customer and which are usually returned the most.
2. Identification of the issues that make the customers return some products more as compared to others, which can include anything from the quality of the product to the fact that it looks different on your website than it does in real life.

Company Dependent

Delay in deliveries also contribute towards the high RTO numbers but there are various challenges faced by the Ecommerce companies as well .When it comes to timely deliveries , with the present logistic structure of the country, lack of standardization in postal addresses is not the only factor . Given the large size of the country, there are thousands of towns that are not easily accessible. Metropolitan cities and other major urban centres have a fairly robust logistics infrastructure. But since the real charm of the Indian market lies in its large population, absence of seamless access to a significant proportion of prospective customers is a dampener.

Now once the causes are identified we can further move towards measures that need to be taken for its reduction.

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How to reduce RTO ?

We all agree that reducing RTO is vital for long term success so depending upon the causes the actionable steps has to be taken for sustainable and reliable results.

Processes that can be followed for

Product Related Returns:

1. Clear and Detailed Product Descriptions: Emphasizing on providing complete information about the product featured on the ecommerce sites , including its features, specifications, dimensions, and materials. This helps customers understand what they’re buying and reduces the chances of receiving the wrong or unsatisfactory products, which can lead to returns.
2. Quality Handling & Packaging : Returns happening due to damaged and broken items is a big concern which if addressed properly can reduce 60–70% of the RTOs. If a product is constantly returned having damage as the major issue , than we must pinpoint what is causing them is it handling or Packaging and should be addressed accordingly by packaging audits. Stringent procedures and standards regarding packaging should be in place for sellers .

Customer Related Returns :

Indian customers return much of the merchandise they purchase online. Now when we have data based at pin code level we can focus on below strategies to deal with unsure and deceptive customers.

1. Offering Exchange over Returns : When customers wants to return a product, provide them with easy exchange options. Allowing to exchange the item for a different size, colour, or variant instead of a refund. By facilitating exchanges, brands can retain customers, minimize the impact of returns, and potentially recover lost sales. This strategy is even followed by the branded stores and local shops in the market.
2. Promoting Pre-payment Options: Providing customers with a variety of payment options but promoting prepaid more by offering benefits and discounts. Offering flexibility in payment options improves the overall customer experience but generally, COD has been observed to cause a great percentage of RTOs, hence avoiding it helps decrease RTO rates.
3. Enable QC-based Returns: Quality-based returns reduce the information asymmetry and helps in making informed decisions moving forward.

Company Related Returns :

Developing a highly rated infrastructure is not an overnight task but we can definitely make use of the available resources for our benefit .

1. Proactive communication for the Dopamine effect : For the customers ordering online dopamine rush happens in 3 stages 1.Ordering 2.Shipping and 3.Delivery . They go through an anxious stage between the 1st and 3rd step so in order to keep the dopamine effect going companies should keep the customers informed about their orders by providing periodic and consistent real-time updates on the order status through SMS, email, or WhatsApp notifications which will help customers to track their deliveries, reducing uncertainty and minimizing returns.
2. Standardization of Postal Addresses: If an online order is placed in India, one will quite likely get a call from the logistics company asking for exact location. This is because there is little standardization in the way postal addresses are written so, as a solution certain location pointers should be made mandatory for the Customers while placing orders and its validity should be checked by using AI tools.

India is the second-most populous country in the world, and it is the home of 1.2 billion people, with such large numbers we need to look for an approach that is both robust and evolving so that we can effectively handle returns, improve customer satisfaction, and drive profitability in e-commerce venture.