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How Gift Cards & Loyalty Points Reduce Return & Exchange Costs

  • Posted on June 9, 2022 by Robert
  • Reading time about 6 minutes

Talking about the eCommerce brands, the returns & exchanges are the common things that every business owner deals with. These happen more often during the holiday season and they can be quite pricey. As per the research by Forbes, the 2020 holiday season had the total value of returned items about $47 to $57 billion. That’s a huge amount and it shows how essential it is to have a streamlined process for returns.

Another important thing is to ensure that you keep those customers that are doing returns from going anywhere else. That is where gift cards & loyalty points come into action. Let’s see in this blog how we can take advantage of reward points and a gift card loyalty program to reduce return exchange costs.

Why do Customers ask for Returns or Exchanges on Products?

As we have discussed above, customers ask for returns and exchanges more during holidays, making it difficult for store owners. Here is some of the main reason why it happens-

  • Delivery/purchase of products that didn’t meet customer expectations
  • The bought products do not match the description or image on the website
  • Received an incorrect product with a different size, pattern, color, etc.
  • Products not delivered on time and are no longer needed when arrived
  • Better deal on a similar product at different eCommerce websites

One of the essential measures is to ensure that the product your web pages claim to deliver is accurate and matches the descriptions. But, most of the problems arise when a huge number of people return or exchange the items bought during the holiday season. In 2019, products worth $41.6 billion were returned.

Impact of Frequent Returns & Exchanges

With the increase in several online shoppers, returns of products are becoming a common thing nowadays. Many customers buy with a plan to immediately return some or all of the items they purchase. The problem is these returns end up costing a lot to merchants, which means retailers need to come up with ways to reduce those costs, especially during the holiday season.

In addition to the costs discussed above, it also takes away the time and efforts of the customer support team as there will be more people reaching out with queries and concerns related to returns. Making the process automated will not only save time but also simplify the steps involved in product returns.

For instance, using a platform that enables you to make a refund of a product instantly without the need of going to the backend will make things smoother as well as faster for both customers and eCommerce brands.

How Using Gift Cards and Loyalty Points Will Help?

Retailers can use gift cards as well as loyalty points as an effective way to boost customer retention and loyalty. Giving refund with gift cards and loyalty points to customers enable them to come back to your store instead of looking elsewhere. Here are some of the benefits of using gift cards and loyalty points programs-

Boost Customer Lifetime Value (CLV)

The customer lifetime value can be defined by the total amount of money a customer is expected to spend in your business on product offerings during their lifetime. CLV acts as a great way for eCommerce business owners to focus as increasing CLV means an increase in revenue without focusing on customer acquisition, which can be costly.

Also, these are the customers that are more likely to become brand ambassadors. Depending on the type of industry, it can be easy for some brands to get repeat purchases such as skincare. If customers like the product, they are more likely to order it again and again.

Using Gift Cards & Loyalty Points to Boost CLV

If your brand plans to offer gift cards or points as an exchange option, it gives an option to bring more people back to the store encouraging them to buy your products again. It may look like a gift for customers but it gives the brand the chance to bring customers not just to browse the website but to purchase something that they want from the options available.

Using gift cards or loyalty points, customers are more likely to make the first purchase at your store and if you have a great product to offer, they are more likely to return. Research says a customer has a 27% chance of a return to the store after a single purchase while after the third purchase, it increases to 54%.

The above stat shows that using this option can offer a great advantage for brands. With the help of the right communication and the right option for gift cards/points, any brand can turn one-time customers into life-long customers, eventually turning them to brand ambassadors.

Increase Average Order Value

For returns, offering gift cards or points can increase the chance of increasing the average order value than the amount value offered. This holds correct in many cases especially if the return is a gift from somebody else.

For example, if you buy a product from a store and you want to return it for some reason. Brand may offer a gift card for the return, which increases the chance of making them spend more than the pre-added value on the gift card to buy something that they want. This will make customers feel like they are not spending much as they are using gift cards plus the added amount for purchasing something of higher value.

Buying something worth $50 and getting a gift card of the same value in return can make them increase the order value to buy something of their choice. Also, if they like the product, they will continue to come back, which is the case of repeat purchases. Loyal customers tend to spend up to 3X more than the lower 90%.

Final Thoughts

From encouraging customers to make a one-time purchase to increasing average order value, using gift cards and loyalty points for product returns and exchanges can enable brands to increase Customer Lifetime Value. If you are planning to add loyalty points or gift cards to boost your eCommerce business, connect with the team of our experts and use Novus, the reliable points and gift card loyalty software to fulfill any specific business needs.

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