High RTO Rates Eating Your Profit? Here's How You Can Tackle Them

How to Solve the High RTO Rates in eCommerce

If there’s one overtly saturated and exceedingly competitive industry of the 21st century (so far), it’s got to be online retail.

With nearly 24 million eCommerce stores already up and running across the globe and more popping up every hour, consumers are undoubtedly spoilt for choice, and business owners, are forced to put their best foot forward.

Moreover, as the internet makes its way to even the remotest parts of the globe, demand is at an all-time high, generating a tremendous amount of opportunity for growth for online businesses and sellers.

As shoppers pick and choose from a seemingly endless array of online stores and catalogs, eCommerce owners are exposed to newer challenges every passing day. Among others that we hear or read about quite frequently, one such rather understated challenge is that of increasing RTO or Return To Origin rates that lead to excessive logistics expenditure causing a dent in your revenue and profits.

What is RTO And Why Should It Worry You?

Put simply, RTO refers to a situation when an order cannot be delivered to a customer and has to be shipped back to the warehouse of the eCommerce company by the courier agency.

RTO rates are the highest in tier 2 and 3 cities and for cash on delivery orders, for obvious reasons. While there are multiple reasons for high RTO rates, the end result is the same for businesses - an additional cost burden that hurts the overall sales and profit margins. 

This is because RTO orders lead to additional expenditure on multiple fronts, including but not limited to the cost of logistics or transit (both ways), lost sales due to items blocked because of being in transit, higher risk of damage to products to be transited back to warehouses, extra cost of re-packaging products after redoing quality checks. And with one-third of all orders being returned to their origin, there’s a mammoth challenge for businesses yet to solved to reduce their logistics and operations cost. 

What are the Major Reasons Behind High RTOs?

Even though there are a plethora of reasons behind why orders are sent back to their origins, there are a few common ones that are found more than 95% of the time. These include: 

1) Inaccurate Information Supplied By The Shopper

In such cases, shoppers do have the intent to make the purchase, but accidentally end up giving incorrect or incomplete information. In most cases, this is the address or sometimes the phone number too where the delivery agent is unable to contact the customer if he cannot locate the address. 

2) Orders Placed From Temporary Addresses 

Oftentimes, there are situations when customers place orders when they are not in their own homes. They either accidentally fill in their permanent addresses, while they are still away or the other way around - fill in their temporary address and then leave before receiving the delivery. In both these cases, orders are forced to be returned to the origin.

3) Impulsive Purchases

One rather common aspect of online retail that buyers tend to fall prey to is impulsive shopping.

Thanks to multiple omnichannel engagement channels that keep customers hooked, they are never too far from making a spontaneous purchase with a pay later or pay on delivery option, driven solely by emotion rather than practicality.

What then happens in such cases is that buyers sooner or later come to realize that they didn’t actually need the item and then refuse it at the time of delivery. 

4) Fraudulent Activities 

There is always a small segment of customers who are habitual of placing orders and refusing to accept delivery. Such people either tend to order from multiple stores with the intention of accepting delivery of the one with the fastest delivery or order multiple items that they may or may not need and then make this decision at the time of delivery, as there is no penalty on refusing to accept the item. 

5) Bargain Hunting Shoppers Who Change Their Minds

This segment of customers is habitual bargain hunters whose primary criteria for placing orders is based on the deals and discounts offered by the store.

These shoppers end up placing multiple orders across stores whenever they spot an irresistible deal and later decide whether or not they actually want the item in question.

This often leads to customers refusing items at the time of delivery in case they realize they don’t need a particular product.

6) Post Purchase Anxiety Or Purchase Regret 

Another byproduct of online shopping is the post purchase anxiety that sometimes comes associated with it.

This is simply the regret that creeps into one’s mind after they place an order - it could be because of the high price point or simply because of the realization that the product is not really needed or the best they could have bought.

This often happens when there is a huge gap between the date of order placement and the date of delivery as it gives more than enough time for the buyer to re-evaluate their decision.

Ultimately, this leads to higher eCommerce RTO rates for your business as shoppers keep refusing deliveries of items they regret purchasing.

While most of these reasons aren’t something you can solve for, especially because they are mostly tied to consumer behavior, you can definitely employ some tactics to steadily reduce your RTO rate. Here’s a look at a few of those:-

How To Tackle High RTO Rates Head-on?

Follow these steps to tackle down the high RTO rates in the eCommerce industry and further grow your online business.

1) Qualify Leads And Verify Orders Before Shipment

One of the top reasons for high RTO rates we discussed was inaccurate information supplied by the shoppers. To tackle this, you need a mechanism wherein you verify the contact details shared by the customer on your site or app. 

A smart, AI-powered lead qualification platform such as SquadIQ can do the heavy lifting for you. From multi-channel outreach to continuous follow ups, SquadIQ devises a solid and consistent engagement strategy that not only verifies the contact information shared by buyers and qualifies your orders, but also engages customers so they stay connected to your store all through their purchase journey. 

2) Make Efficient Deliveries With A Logistics Recommendation Engine

Let’s face it: We’re living in the era of hyper-personalization. Netflix recommending movies you would like, YouTube proposing which video you should watch next, Amazon showcasing similar products to purchase on the Thank You Page, and Instagram throwing suggestions of people you should follow - recommendations are everywhere.

Similarly, a logistics recommendation engine matches you with the right logistics partner based on the delivery address, date, product type, etc. for every order you receive.

This ensures you save some huge bucks and time on shipment so even if your RTO rates are high, you don’t burn a hole in your pockets due to failed or multiple transits.

A robust AI-enabled logistics aggregator such as ClickPost holds performance information of an endless array of carrier partners that it recommends for each of your orders based on your priorities and requirements.

Apart from increased fulfillment rate, reduced delivery times, and optimized logistics costs, ClickPost helps you drastically reduce your RTO rates. 

3) Create Branded Order Tracking Pages

An order tracking page on your website will ensure customers can view the status of their order by logging into their accounts whenever they like and thus have all the information they need about their order including its delivery date.

This will help reduce RTO rates by keeping your shoppers informed about their purchases and also helping resolve any queries they might have with regards to their orders once they are on that page. 

Here’s an example of one by H&M: 

ClickPost uses real-time tracking and predictive analysis to deliver a post purchase experience that ensures clear communication and a seamless shipping experience.

Using ClickPost not only provides efficient supply chain management, but their unified API platform also facilitates visibility into the logistics and operations of order fulfillment so that customers always know what to expect.

4) Automate Order Status Notifications

Very often, shoppers forget about their purchase until the day of delivery - especially if the ETA is too long.

Therefore, no communication from the time of order placement till when the order is out for delivery can be dangerous as it invites the risk of RTO. The customer has had enough time to change their mind or research for a better deal, or worse still, just not need the product anymore. 

So, make it a point to share automated order status updates with buyers through their preferred channel - it could be push notifications, email, SMS, or even WhatsApp (which a lot of newer online stores, as well as younger shoppers, are preferring these days), along with a link that leads them back to their order tracking page on the website or app.

These could be once the order is packed, dispatched, shipped, and ready for delivery. The idea is to keep shoppers constantly reminded that their purchase is on the way so even if they wish to cancel it, they do it well in time before it is out for delivery. 

A simple update like the following could do wonders: 

5) Offer Proactive And Omnichannel Customer Support

Consider this - a shopper completes a purchase on your store today and is shown an estimated delivery date of 10 days later.

Sometime during the week, they start getting second thoughts about their purchase and are not sure whether the product they ordered came with the specifications they had in mind (and the product description is not helpful).

In such a scenario, if your customer support reps are easily accessible through multiple channels, the buyer might reach out to them and get their queries answered.

If that isn’t the case, they might just go ahead and cancel their order if their apprehension persists. 

Therefore, offering proactive support via multiple channels including social media, phone, email, chat, and even WhatsApp is a must if you want to reduce your return to origin rates. 

Zara, one of world’s largest fashion stores has multiple ways to reach their support staff listed on their website:

6) Incentivize Online Payments

Since RTO rates are the highest for pay on delivery orders, you want to nudge more and more of your customers to switch to prepaid order placements.

Given customers’ natural apprehension towards online payment modes and inclination towards COD, you would have to go the extra mile and incentivize shoppers on choosing the former.

This is especially critical for big ticket purchases - where handling and shipment costs are significant and you cannot afford to miss delivery or have the product spend too much time in transit. 

Here’s a look at how India’s largest fashion eCommerce store, Myntra does it: 

Let’s Get To Work And Bring Down RTO Rates

In today’s day and age, RTO rate is not something you can ignore as an eCommerce store owner. It’s almost like an invisible enemy that could be slowly eating through your profits without you even realizing it.

To make the most out of every sale, put the above strategies to use and watch your profit margins widen, one order fulfillment at a time.