How to reduce RTO? - The ultimate guide to reduce RTO!
Reducing RTO is one of the key challenges in the E-commerce industry. The demand for online purchases is growing at the same time that RTO rates are skyrocketing. As customer has numerous quick options for buying online nowadays, they are likely to return a large number of products if the service or purchasing process is problematic.
“In 2021, people returned products worth $428 billion, or little more than 10% of overall retail sales. The National Retail Federation estimates that the cost of returns is $101 billion.”
Let’s take a deep dive into the RTO world and discover how to survive and prosper in the RTO-filled e-commerce market by reading this article.
What exactly is Return to Origin (RTO)?
Return to Origin (RTO) is described as the problem in which an order is never delivered to the customer and is instead returned to the warehouse for a variety of reasons. This effectively cancels the order, resulting in a refund of the purchase price to the consumer while your company continues to face the burden of shipping charges. The order must then embark on an Odyssey-level adventure back to the initial warehouse.
“Did you know that at least 30% of all items ordered online are returned, compared to 8.89% in physical stores”
The painful RTO tale of eCommerce
RTO is very painful for eCommerce companies especially when they try to scale their businesses and it becomes a major roadblock for the business. An in-depth shopper behavioral analysis conducted previously by Nielsen India revealed that during the Holiday season, one out of every five orders was canceled or returned before delivery.
RTO orders become a headache for retailers when they have a high volume of orders. RTO creates multiple problems for D2C brands and makes them lose their valuable money in order to fulfill customer needs.
The RTO is the most serious problem for e-commerce businesses, second only to abandoned carts. There are plenty of platforms that can solve the abandoned cart recovery problem and increase orders.
If a retailer wants to be viable in the eCommerce market, they must lower RTO expenses. If they do not, their profit margins will suffer, and it may also begin to create unpleasant problems. It is difficult to decrease RTO requests to zero, but taking care of a few factors can optimize and reduce RTO charges to some extent. To achieve considerable RTO reduction, you must first grasp it thoroughly.
Let’s first get to know the impacts of RTO on the eCommerce
RTO-related costs are the major impacts that are destroying the growth of the eCommerce business. RTO-related costs include all costs involved with the returns process.
“Every RTO constitutes a loss of INR 100-150 per order”
Top-of-the-funnel processes like marketing, attracting customers, nurturing customers, and convincing them to buy products need a significant amount of time and money. However, it is extremely painful when RTO renders these efforts futile.
Key problems of RTO:
- Costs of forward and reverse logistics
- Inventory Block (Items stuck in transit)
- Return products are physically inspected and repackaged
- Costs incurred due to expiration
- Increased risk of damage to fragile items, resulting in higher shipping costs
- Cash handling fees apply to COD orders
- Order processing incurs operational and resource costs
- Repacking and shipping it to another customer who might order the product again
- Customer support costs
- Increased customer churn rates
Key reasons behind the RTO:
- Customers want their orders to be delivered by a specific date, however, there is no mention of an expected delivery date when they place their order.
- The shopper relocated but failed to change the address while placing the order.
- The customer did not receive the order update properly.
- The customer failed to open the order/delivery update SMS or Email.
- The customer has chosen the wrong address while the checkout process.
- They made many orders from various websites, intending to buy from the one that offered the greatest deals and the quickest delivery. As a result, they canceled additional orders.
- Bad post-purchase experience.
- 70%-90% of orders are COD since buyers have the freedom to personally inspect the product while delivery. Unfortunately, this provides them with an easy opportunity to reject an order upon delivery or refuse payment, resulting in RTOs.
- Lack of clarity in pricing and product mismatching
- The customer was unavailable/inaccessible.
- Poor customer support process.
- Delay in delivery.
RTO occurs for a multitude of causes. Although the reasons differ between brands, identifying, analyzing, and approaching suitable strategies will assist you in resolving RTO issues. A unified method can manage and offer you successful orders.
How to reduce RTO in e-commerce
“How to reduce RTO?” This term, which you may have Googled plenty of times, comes up with ineffective ideas. But the below strategies are proven and they will significantly reduce your RTO:
Inform your consumers about the order status: RTO will be reduced if orders are updated on time. Tracking updates are critical to customer satisfaction and can significantly reduce tension among anxious customers waiting for their products.
Solution: The most effective way to offer tracking updates is to use a service that is both quick and efficient. One such way is to message customers on WhatsApp, which has been shown to be effective because it is easier than sending emails or text messages.
“WhatsApp messages have a 98% open rate and a 45-60% click-through rate, which is 5 times higher than emails and SMS.”
Confirm COD orders: When a COD order is received, a confirmation message to verify it reduces the RTO. Make pre-paid orders more attractive than cash-on-delivery (COD).
Solution: Asking the COD order confirmation question in an instant WhatsApp message will reduce the RTO. Reduce NDRs and frauds with COD confirmation.
Reduce cash on delivery orders: With COD orders, the customer has nothing to lose but the brands have everything to lose. The issue is particularly severe with COD orders brands seeing up to 40% RTO!
Solution: Instant smart WhatsApp automated campaigns like COD to prepaid offers while the customer is confirming will reduce the risk of return to origin automatically.
One-stop solution for your RTO problems: Hello24’s WhatsApp business API platform is an intelligent RTO-controlling solution that can implement all of the above strategies. It increases delivery rates by 20% by using automatic address correction, COD-to-Prepaid conversion campaigns with fully integrated payment processing, order modification flow, intelligent order confirmation, customer support automation, and other timely notifications.
Hello24.ai got an effective way of reducing RTO for your brands! Set up complete automation of your marketing, sales, and customer support activities using Hello24.
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