The Nightmare After Christmas: How to Reduce Customer Returns

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The Nightmare After Christmas: How to Reduce Customer Returns

You’ve heard of the Nightmare Before Christmas, but for retailers, especially those carrying consumer tech products, the real horror begins after gifts are opened. Here’s why some companies are hoping Augmented Reality will help them figure out how to reduce customer returns.

This holiday season, Santa will be delivering hot consumer products all across the globe. And if the big guy doesn’t come through? Well, it seems consumers are perfectly willing to take matters into their own hands. According to Business News Daily, 74 percent of U.S. adults plan to buy at least one tech gift for the holidays, with technology spending on smart devices, consumer electronics, and tech accessories projected to reach a record-setting $97.1 billion in revenue.

For retailers, this kind of spending is a boon. It’s also a nightmare….the kind that comes after Christmas.

What is the reason for product return?

With all these tech devices under the tree comes a slew of customer support calls, product returns, restocking, and a lot of inventory management. Gift recipients everywhere will need to learn how to unbox, install, activate, and operate their new gifts – and if they can’t figure out how, they’ll be waiting in your return line. It presents a massive operational and financial challenge for retailers everywhere.

Lack of customer knowledge about products

Just how big of a challenge is this really? Nearly 70% of customers said they would return an electronic because it was too difficult to operate and 54% because they didn’t know how to install the product. These are unnecessary reasons for returning goods. Companies suffer from tremendous financial losses due to the increase in returns, as well as large expenses on increased customer support.

A Zendesk report in 2021 found that online retailers were handling 50% more customer tickets during the holiday season than the year before. This leads to increased support costs. Worse, customer frustration drives product returns, which are estimated at 30 percent during the holiday season, causing billions in losses for retailers.

Customers prefer self service

And yet despite the size and scope of this challenge, tech manufacturers and retailers are still struggling with figuring out how to reduce customer returns. Existing user manuals and video tutorials are not always effective. Here’s the kicker: by and large, most consumers prefer to self-serve/solve their tech frustrations anyway.

For all these reasons and more, the two weeks after the holidays tend to keep manufacturers, retailers, and everyone in between short of breath. Cheers to a little post-holiday anxiety!

Can Augmented Reality reduce customer returns?

Multiple consumer brands and retailers have begun experimenting with Augmented Reality (AR) as it pertains to customer support and service. The technology has come a long way, and it’s not hard to see why it might be a viable option for strained retailers struggling with a rush of returns.

AR simplifies customer experience

It’s easy to see why AR is so helpful for consumers. Instead of spending the day flipping through pages of a complicated user manual, consumers simply unwrap their presents using an AR instruction guide. The following hypothetical scenario illustrates the value of an AR instruction manual.

You finally get your hands on that new drone you’ve been wanting. The only problem is the box has five different cables, two remote controls, and a charging pad included. Not wanting to come down from your present-unwrapping high, you might get impatient and decide to call customer support. Worse, you may get frustrated and decide it’s not worth the hassle, opting to return your new gift.

But wait! AR is here to help. By pointing your phone at the drone, an AR instruction manual overlaid on the screen image shows you exactly what each button on the remote control does, and how the drone should be assembled and operated.

The predicted growth of the AR market

This scenario may not be so hypothetical after all. The technology is being adopted quickly, with IDTechEx predicting that the AR market will be worth over $30B by 2030. With the number of mobile augmented reality users expected to reach nearly 2.4 billion by 2023, forward-thinking companies are harnessing this powerful technology to enhance the initial customer engagement with their products, during purchase, onboarding, setup, troubleshooting or regular maintenance.

Solutions for how to reduce customer returns

Manufacturers and retailers are testing AR solutions right now to solve the following challenges:

Great unboxing reduces returns

Despite the growing availability of unboxing videos – Forward Influence reports that more than 90,000 viewers search for unboxing videos on YouTube every month – customers are still calling the contact center for assistance with device installation and operation. According to a recent TechSee survey, 31% of DIY consumers reported having to give up mid-process and contact a customer service agent for assistance after failing to self-install successfully.

One example of where Augmented Reality is used to assist with unboxing and setup is Ikea’s AssembleAR app. The app, which is built on Apple’s ARKit, utilizes the original diagrams and layouts of the paper IKEA manual but overlays them with animation and life-size references that simplifies the self-assembly process. Post-Christmas installation will never be smoother.

Product introduction using AR

Brands have also harnessed AR capabilities to provide users with an overview of their new gift via a visually immersive experience. For example, Nespresso allows users to scan their packaging and get step-by step operational instructions for their new coffee machine, using AR to improve customer experience.

And, if you are lucky enough to find a new set of wheels in your Christmas stocking, the good news is that car manufacturers, such as Hyundai and BMW, enable their customers to get acquainted with their new vehicles with augmented manuals, including how-to information for repairs, maintenance and features.

Visual guides for troubleshooting and tech support

Brands are making their customers happy by providing them with access to an interactive visual guide that clearly explains the instructions in a step-by-step format, reducing the need to contact the company directly. Interactive visuals such as 3D arrows and animations eliminate the language barrier and reduce complexities.

The most advanced AR user manuals feature computer vision AI technology, which can help auto-identify the problem and guide a customer to self-resolution. For example, when computer vision interprets an error message on a new printer and detects a flashing LED light, the customer will automatically receive the relevant troubleshooting instructions.

Billing and documentation made easier with AR

Expecting to receive a subscription for Christmas? As great as that Spotify Premium or PlayStation store subscription is, they bring repetitive inquiries related to contracts or billing for tech companies. Companies can reduce their operational burden by using AR to provide customers with line-by-line explanations about their service contract or monthly bill, or by providing augmented instructions explaining how to make changes to their plan, add users or change contact details.

The results: fewer returns and happier customers

From the enterprise standpoint, AR-delivered instructions deliver better results, significantly alleviating the pressure on the service operation. There are less calls to customer service asking for help, a reduced need to dispatch technicians to customers’ homes, and, most importantly for retailers, less confusion about how to use products that resulted in unnecessary reasons for returning goods – benefits that result in billions in savings every year.

The future direction of AR instruction guides

By the time next Christmas comes around, expect the next generation of AR technologies to be more popular. Head-mounted devices – also known as smart glasses – are ideal in situations where a customer needs two hands to complete an installation, such as for complex assemblies or for safety purposes. For example, a screen based device is useless to a customer attempting to install a smart light fixture while perched on a ladder.

Another technology which will take product unboxing to the next level is Visual chatbots, which are basically chatbots that can see. With Image Recognition technologies, visual bots let the consumer show his new product and receive interactive AR guidance through his smartphone.

For example, when unboxing a new smart security system, the bot can see the customer’s physical space, advise the optimal locations to place the cameras, and most importantly – correct the customer if he has done something wrong.

Reducing customer returns

Once considered a whimsical novelty, AR has found a practical use as an instructional tool for helping new users install, operate and troubleshoot their tech devices across many industries and resolve businesses’ nightmares about how to reduce customer returns. As we approach the holiday season, the timing has never been better to celebrate with AR as an ideal technology to enhance the customer experience with their new tech gifts.

Liad Churchill, VP Product Marketing

Liad Churchill, VP Product Marketing

Artificial Intelligence and Deep Learning expert, Liad Churchill, brings depth of knowledge in marketing smart technologies.


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