It's plain and simple. If you want to make profits from your ecommerce store - you need to prevent RTOs. Because RTOs will happen regardless of whatever steps you take. But there are certain ways you can significantly reduce that risk.
In this piece, we're going to discuss the same. So make sure to buckle up - there's a bit of sweet and sour in here. Let's dive right in...
- What is RTO?
- Why is RTO bad?
- What are the costs involved with RTO?
- Delivery charges
- Casualty costs
- Packaging costs
- Expiration costs
- How to reduce your RTO?
What is RTO?
RTO is short for Return To Origin. When a customer purchases a product from your store... you have to fulfill it. And you must have a process that you go through to make sure that product gets delivered to the customer.
Now once the customer gets the order at their doorstep. There may be plethora of reasons because of which they decide to return the product back to you. Aka back to your warehouse. And that my friend is what RTO is. You as a vendor are the Origin, and the order is returned back to you. Hope that makes sense.
And it should be very clear how this is bad for business. Because it's extra costs to you, with no added benefit.
Why is RTO bad?
Let's take a scenario. You have an online store where you provide Free Shipping for orders above $10 (let's say). Usually you would be increasing the base prices of your products to accomodate for the free shipping.
So what exactly are RTO related costs? Well, when a customer makes the purchase - yet the product is undergoing the process of being returned back to you... in this case all the costs incurred are RTO related costs.
Let's take a deeper look at this 👇
What are the costs involved with RTO?
1. Delivery charges
Yep. First and foremost - You're going to do shipping of a product that is going to come back. So basically you're paying the delivery charges for two way trips.
That's lost money.
2. Casualty costs
The product isn't held in the hands of a caretaker while it's travelling from the warehouse to the customer's shipping address. Lol. It's put in the back of a huge truck alongside with hundreds of other products, some heavy, some sharp, etc etc. And then comes all the shaky movements that happen when the truck is driving through the offroad tracks... I know it's an exaggeration but you get the idea.
It won't be a surprising thing if the product gets damaged while it's being delivered. And all that only to come back due to RTO. Well that's heavy losses for you my friend.
Ok, but what if the product gets damaged and the customer doesn't want it because of the damage... yeah it's things like that you have to be careful of.
3. Packaging costs
You don't throw a pen in the back of a van for it to be shipped. No, you put it properly in a box, which gets covered in bubblewrap, and then another layer of cardboard box... that's not free.
You stick the invoice on the back of the cardboard box. And all that effort goes into vain when the product has to come back to you. Get rid of that wrapping and put the product back into warehouse.
4. Expiration costs
Now this isn't necessarily a medication expiry thing we're talking about here... no no. This is the expiration of an event for example. Let's say you're selling crackers at Diwali.
An RTO might happen because you shipping the product too late. Diwali was 3 days ago and your crackers reach the house of the customer. They're gonna return it right away (most likely). Since it does not hold it's value anymore. The auspicious occassion has passed.
How to reduce your RTO?
Alright, now let's come to the main juice of this article. How the hell do you reduce that extra pain in the head? First of all you have got to understand this...
A very silly but huge reason why some orders don't get delivered is because the customer entered the wrong shipping address by mistake. And if your store is on Shopify - you know that there is no way for a customer to change their shipping location. But worry not there are some really minimal but intelligent apps that take care of this. Our best pick is the Shipping Address Edit Customer App for Shopify stores.
Now, let's look at some of the major actions you can take to reduce RTO.
- Warehouse location
So, this matters a lot. If all your orders are coming from Delhi, and your warehouse is in Pune... you better move to Delhi. The process would become so much easier. And the cost of RTO would be significantly lower.
- Explain your product clearly
A lot of the times customers order something thinking that it's one thing, and realising it's another. So they return it.
- Try to prevent COD
A lot of RTOs has to do with Cash on Delivery orders. When you give your customers a prompt saying that they should try to pay online for a 5% instant discount. Trust me this will not hit your revenue because you're giving that 5% discount. But instead it would be a massive reduction in your RTOs. Since customers who pay online are less likely to return the product. It's a proven fact.
- Faster Shipping
If your shipping takes 7+ days, then there's a good likelyhood that the customer changes their mind. Maybe they don't need the product anymore. Maybe they found a better price, etc.
So you need to make sure to deliver your product as quickly as possible, and get the sale closed.
There are ton of ways through which you can reduce your RTOs. But you have to be very truthful and careful about everything that is written/visible on your storefront. Stay away from lies and false advertising. As this is a huge reason for RTOs.
Hope you enjoyed this little bullet format quick guide. And I wish you store less of those RTO orders.
Have a good one!