The bane of e-commerce is the large percentage of purchased items that are returned. As noted in the initial installment of this article, Elise Dopson reports, “Data suggests that 20% of online-bought products are returned, compared to just 9% of items bought in a brick-and-mortar store.”[1] Journalist Suzanne Kapner believes the problem is even worse. She reports, “The share of online purchases that are returned averages 30% or higher, depending on the category, three times the rate in physical stores.”[2] That figure varies by product category, but the trend has been consistent over time. While high returns are a challenge for retailers, the option to return purchased items is important to consumers. Sanaz Hajizadeh, Senior Product Manager at Happy Returns, explains, “When customers know that they can get their money back just as easily as they can spend it, they’ll shop with more confidence and spend more.”[3]

Chuck Johnston, Chief Strategy Officer of goTRG, reports, “Sixty-seven percent of all consumers look at the returns policy before purchasing. Many will forgo a retailer altogether if it doesn’t provide a seamless returns experience. In a recent survey by reverse logistics software company goTRG, 78% of consumers said returns shipping costs and restocking fees could prevent them from purchasing. In addition, 50% indicated that short refund windows would make or break their decisions. Nearly a third said having to print a label or repackage an item was inconvenient enough to take their business elsewhere. Simply stated, convenience is the number-one factor that consumers consider before choosing where to shop — and especially when making online purchases.”[4] The lesson retailers should draw from these facts is that they need to implement world-class returns and reverse logistics strategies.

Making the Best of a Growing Challenge

Acknowledging that the increase in e-commerce is a good thing, Johnston also acknowledges that returns are a big challenge. He writes, “Growth is an excellent problem to have, but one of the increasing concerns for big-box and online retailers has been the impact of managing the growing returns volume. According to NRF, the blended return rate between in-store and online in 2020 was 10.6% of sales, or $428 billion. With retail sales estimated to be $4.50 trillion in 2021, the projection for returns is around $503 billion.” Johnston concludes, “The shift to e-commerce during the pandemic demands solid returns management processes and a smooth customer experience, while reducing costs and eliminating waste. Maximizing value recovery will be more important than ever with the expected high returns volume, while an efficient, easy customer return experience will be key to increasing shopper loyalty and driving sales.” Below are some of the options available to retailers and expert suggestions about how to achieve the goals discussed by Johnston (i.e., smooth customer experience, reduce costs, and eliminate waste).

Option 1. Get Consumers to Keep What They Purchase. The best solution to the returns challenge is to prevent returns in the first place. Kapner writes, “The surge in pandemic-fueled online shopping has created a new urgency to solve a decades-old problem: returns. Companies such as Walmart Inc. and Amazon.com Inc. are telling customers to keep unwanted items. Some retailers are introducing virtual dressing rooms and made-to-measure clothing so that shoppers keep more of what they buy. Others are scoring shoppers based on their return rates, much the way credit-ratings firms tally consumers’ creditworthiness.” Consumers with an excessive history of returns can be banned from making further purchases. Dopson suggests that basic things, like packing and shipping items securely, can make a big difference. She notes, “It’s easy to think that once an item has left your warehouse, it’s off your plate. The truth is, some 30% of items are returned because they arrived faulty or damaged. But you wouldn’t ship them in that state. Something went wrong in transit. Granted, your delivery carrier plays a big role in this. But there are steps you can take to minimize the chances of an item becoming broken or faulty through shipping — and therefore, being returned.” Navjit Bhasin, the chief executive of Newmine, told Kapner, “For a typical retailer, every $1 million reduction in returns can translate to $500,000 added to the bottom line.”

Option 2. Post Returned Items Back to the Warehouse. Dopson writes, “This is the most popular returns process for ecommerce-only brands without a brick-and-mortar store. When a customer wants to return an item they’ve bought online, they post it back to the warehouse or fulfillment center. From there, the merchandising department inspects the product and confirms it’s eligible for a refund.” Last year, Johnston noted, “67% [of consumers preferred] to ship their holiday returns rather than return in stores because of the perceived risk of COVID-19 exposure.”

Option 3. Return Items to Store. Before the advent of e-commerce, this was the only option consumers had — and it remains an option today with added twists. Dopson writes, “Research shows that 62% of shoppers are more likely to shop online if they can return their purchase to a physical store. If you have one, consider allowing ecommerce customers to visit the store to return their item. The returned goods can then be inspected and put back on the shelf for future customers. Not only are store returns more convenient, but enticing customers to enter a store could prevent future returns. If a customer is returning a t-shirt that doesn’t fit, for example, they’ll have the opportunity to try on other sizes during their visit. That gives them more confidence in future purchase decisions — both online and offline — because they know their size.” As I noted, there are also a couple of new twists to the “return items to store” option. First, some stores, like Kohl’s, have introduced Amazon return kiosks in their physical stores. These kiosks greatly reduce the returns hassles for consumers. They also get consumers inside the store, which can result in new sales opportunities. The other twist is that some stores are accepting returns even if the item was purchased from some other retailer.

Concluding Thoughts

It’s always important to manage customer expectations so they are not blindsided when something goes amiss. Constantinos Garoufalidis, a content provider at FreightCenter, writes, “Have all your bases covered when it comes to how your business handles returns. Make it clear what is returnable, a timetable for returns, who’s responsibility it is to ship it back, and where product needs to be sent to [or where it can otherwise be returned].”[5] He adds, “Flexibility in the returns experience goes a long way with customers. Look for ways you can make sending items back easier or offer in-store drop-offs for locals.”[6] In the concluding installment of this article, I will discuss some of the options available for handling returned items and other reverse logistics challenges.

Footnotes
[1] Elise Dopson, “The Plague of Ecommerce Return Rates and How to Maintain Profitability,” Shopify, 25 August 2021.
[2] Suzanne Kapner, “Stores Have a Mission: Getting You to Keep That Thing You Bought Online,” The Wall Street Journal, 9 February 2021.
[3] Dopson, op. cit.
[4] Chuck Johnston, “How Retailers Are Bettering the Online Returns Experience,” SupplyChainBrain, 4 August 2021.
[5] Constantinos Garoufalidis, “What Is Reverse Logistics?” FreightCenter, 11 August 2020.
[6] Constantinos Garoufalidis, “Using Reverse Logistics to Increase Customer Satisfaction,” FreightCenter, 12 November 2020.