Top 10 Return Metrics Every Shopify Merchants Should Know

Introduction of Return Metrics Every Shopify Merchant Should Know

Did you know that there are four million eCommerce stores in Shopify? That’s four million entrepreneurs like you vying for a customer’s attention. So, in a sea of like-minded sailors, how will you steer ahead? One answer is by enhancing your customer’s returns experience. 

An excellent return experience is synonymous with growing your brand by retaining customers. And the key to unlocking the growth potential of Shopify product returns is to unravel the mysteries in the returns data with returns metrics.

A metric, in simple terms, is a quantifiable measure of activity or performance. Analyzing Shopify returns metrics can provide the solution for creating customer-friendly returns policies, solving cost deficits, and increasing revenue.  

This article looks at the most prominent Shopify returns metrics that yield real-time measurements, cast viability into brand growth, and analyze return’s impact on a brand’s bottom line. 

The Value of Analyzing Shopify Returns Metrics

Astonishingly, repeat customers can potentially generate 300% more revenue than first-time customers! This is why thoroughly examining your return metrics will tell you what inspires customers to repeat purchases. Overall, you can identify the areas that need improvements for structuring an excellent customer experience. 

1)Upgrade Product Quality 

Returns metrics like return by reasons and most returned SKUs identify a central friction area in a shopper’s experience: product inconsistencies. Sizing issues and uncertainties are considerable factors for apparel returns, as are inaccurate product descriptions and product fit.

When you recognize the products that are frequently returned or identify the reasons, you can reorganize inventory or revisit your product design. 

2)Learn about Market-Product Compatibility

When a customer returns a product, they also indicate what they wish to get from your store. For example, a shirt returned for sizing issues suggests that the shopper has a purchase intent. In this case, you can nudge them towards an exchange. 

When returns are made because shoppers don’t like a product, they will likely seek a refund. Here, you can introduce store credits or warranties. 

3)Map Customer Behavior and Preference

Ecommerce Product Returns metrics can give your Shopify store critical insights into customer behavior and cumulative preferences. You can analyze customer behavior based on recency, frequency, and revenue generation after a return. 

For example, a shopper who purchases a product within a day of a return or frequently shops is the most loyal to your store. Or shoppers who buy high-value products, albeit not often, can be roped into a loyalty returns program to uplift their experience further.

4)Identify Customer Retention Pathways

The window between placing an order and a return request reflects deeply on your return policy. And an easy, customer-friendly return policy is a key determinant of customer retention. Repurchases after a return are done when the customer trusts return policy and how you handle their returns.

5)Improve Operational Capacity 

With return metrics, you can evaluate your forward and reverse logistics processes. This includes timely delivery and pickup rate, order fulfillment speed, or the time required for quality checks and refunds. 

11 Return Metrics that Every Shopify Store Should Monitor

1)Return Rate

The return rate metric is a generic estimation of the total number of returns incurred by a store at a given time. It is juxtaposed against the total number of sales. Return rate can be further classified into what is returned and how frequently by what number of customers. For a better analysis, you can monitor the return rate weekly, bi-monthly, or monthly. 

2)Cost per Return

This returns metric measures the cost you incur for a product return. It’s a cumulative value of return shipping charges, labor charges, refunds, restocking, or repackaging. 

With a breakdown of the different components involved in returns, you can get an accurate estimate of reverse logistics costs. When you understand the problematic areas, you can strategize to reduce costs. For example, return labels can be paperless or refunds made into store credits. 

3)Customer Retention and Customer Churn Rate

The customer retention rate measures the percentage of customers who shop with your brand over an elongated period. Customer retention is synonymous with brand growth. 

You can further analyze this metric to understand how to retain customers. Is it exchanges or store credits? Or a self-served returns portal and prompt refund? The churn rate metric is the exact opposite. It measures the percentage of customers lost over a period. 

4)Return by Reasons 

The reason for returns is a critical metric that gives you a clear answer to why customers return products. Be it late delivery, wrong size, damaged product, misaligned expectations, or product not fitting its description. With clear customer feedback, you can prepare to tackle these causes.

For example, returns made due to late deliveries can be handled with a streamlined milestone-based notification system.

5)Most Returned SKUs

This metric is central to investigating the SKUs that incur the maximum return requests. By analyzing this metric, you can determine if a product fails to meet market demand or needs a redesign. 

Therefore, this metric leads you to manage your inventory better and tweak your production line to make products fit customer needs. 

6)Exchange rate

The exchange rate metric estimates the percentage of returns that end up as exchanges. An exchange brings the triple-fold benefit of retaining revenue, nudging customer satisfaction, and giving customers exactly what they need. 

Unlike the refund rate, the exchange rate reveals the degree to which a customer is satisfied with your brand experience, product, or returns management. The more visibility you have of the exchange rate metric, the better you can strategize to prioritize exchanges. 

7)Purchase Frequency 

This metric calculates the frequency with which customers purchase pre- and post-return requests. You can also measure the times a customer makes a repurchase after a return, along with the time gap. 

8)Refund Rate

Though the return rate gives an absolute score to the return scenario your store faces, it is not thorough to roping in the financial aspect of it. The refund rate shows the number of times you refund the customer to the original mode of payment. 

Customers who seek a refund are not only dissatisfied with a product or return service, but more importantly, they are unlikely to make a repeat purchase anytime soon. Therefore, monitoring the refund rate is a critical returns metric that determines the health of your return policy.

9)Methods for Return Payments

This metric refers to the composition of payment methods that customers seek. This can include the refund-exchange ratio, store credits, bank deposits with credit or debit cards, and e-wallets. 

10)Timely Pickup

This returns metric falls on the operational side of your returns management, i.e., the accuracy of pickup made by your designated courier.  Returns are already a frustrating experience; you certainly do not need a lousy pick-up experience to heighten customer dissatisfaction. 

Since timely pickup results in timely refunds or exchanges, you analyze and monitor your carrier’s performance with this metric.

11)Customer Lifetime Value

This metric measures the total revenue an individual customer generates over their engagement period with your Shopify store. You can estimate it either bi-yearly or yearly.

With a birds-eye view of each customer’s spending, you can also determine their shopper’s persona and preferences. You can curate offers or returns experiences to retain their loyalty and long-term revenue potential.

How Returns Metrics Help Improve Returns Experience and Operational Effectiveness

Now that we know which Shopify returns metrics to look for, let’s take a brief look at their aggregate impact on your operations and returns strategy: 

• Acting on Customer Feedback: With customer reviews of returned products, you can analyze product viability, quality of returns shipping, preferred refund methods, etc.

• Managing Returned Inventory: Sift through your product assortment to remove most returned SKUs or store inventory strategically to facilitate faster exchanges.

• Reducing Logistics Costs: Reorganize warehouse space, avail shipping discounts, inventory management, and automated returns portal.

• Optimizing Return Policy: Extend returns window, promote loyalty program for high spenders, introduce e-gift cards for fast returns, etc.

• Outsourcing Returns: In case of a high return rate, outsource to 3PLs to balance cost and streamline reverse logistics.

Why Should You Prioritize Automated Shopify Returns? 

Manually processing returns, placing courier pick-up schedules, and handling refunds or exchange requests are signs of old-school return management. It not only chips away time and money and increases customers’ frustration.

With automated returns, you can resolve the escalation period, handle x number of return requests automatically, allocate couriers, and get detailed analytical reports. You can create customizable workflows that work best for each category of shoppers.

Moreover, automated returns take away the limitations of manual returns with the Shopify app, preventing you from repetitive tasks. 

Tools to transform Returns Data into Actionable Goals and Outcomes

One of the main reasons retailers shy away from analyzing returns metrics is the tedious hard work that goes into tracking them every day. This is why tools that automatically monitor your store metrics and generate critical insights can save tons of energy and time.

Here we present two of these tools you can use to streamline your data analytics process:

1)Shipeak Shopify Returns App

Shipeak provide Shopify returns app is an end-to-end solution for managing returns requests, tracking, notifications, and refunds. It takes away the greatest pain point with Shopify returns, manually processing and allotting returns and refunds.

With this, you can set your return rules, return window, non-returnable SKUs, etc. With a self-serve branded portal, customers can easily make a request, which works according to your return policies and rules. You can embed data collection by collating return reasons and differentiate fraudulent returns with image verification.

The most significant advantage of this app is a unified return tracking dashboard where you handle all RMA requests, generate return labels, and take easy actions with filters for convenience. The app also enables you to set workflows for automatically sending email communications. 

Moreover, in line with aiding your business decisions, the app generates detailed analytics on different Shopify returns metrics.

2)Shipeak Returns Management

The automated Shopify returns management is further enhanced in the Shipeak returns management module. Unlike the app version, this SaaS product assists with product exchanges. With Shipeak extensive courier integration capacity, you can quickly onboard any carrier within a day. 

Like its app counterpart, the returns module hosts a multifunctional single-window dashboard for automatically processing return requests. It further allocates couriers based on fixed rules and business preferences.

Shopify store owners can benefit from its NPR (non-pickup report) management portal that handles pickup exceptions. By enabling real-time communication with customers, pickups can be rescheduled successfully. Shopify merchants can also send branded tracking portals that come with personalized product recommendation features for cross-selling. 

Conclusion

Shopify returns are a crucial aspect for any Shopify retailer. With advanced visibility of returns metrics, you create returns policies and adjust your manufacturing and reverse logistics. And software tools are the additional asset with which you can translate the analytics into a working masterplan to retain customers and enhance customer experience.

FAQs

1)What are the most common reasons for Shopify returns?

Return causes are different for different industries. For example, the most common reasons for an apparel Shopify store can be sizing issues. For a furniture store, it can be because the product doesn’t fit customer expectations. This is where returns metrics like reasons for returns help retailers understand the common causes for a product return. 

2)How to reduce Shopify returns?

Reducing Shopify returns requires a concrete strategy. This includes accurate product descriptions, quality images, video assistance, live-customer support, an easy returns policy, etc.