Retailers and consumers often think of the return process as straightforward. However, many unexpected roadblocks (both literal and figurative) can arise that affect both the retailer and the shopper. And research shows the financial impact of these roadblocks in the return experience can be a major hit to retailers.
According to the National Retail Federation, consumers returned products worth an estimated $428 billion in 2020, which was 10.6% of the total U.S. retail sales. While returns are a routine part of the business, the rise in return rates has negatively impacted retailer profitability, and executives across the retail industry are seeking solutions.
To understand the incremental costs for ecommerce returns, let’s take a look at the journey of a returned item and the aspects of the process that present risk and costs to the retailer.
Starting Point: Micheala’s House
I find myself, a pair of designer jeans, discarded to a chair in Micheala’s bedroom as she tries on two other pairs in different sizes and styles. Micheala talks to herself as she tries each pair on excited about the stitching, bling, or pockets, but rubber hits the road as she stands back to assess the overall fit. I was too tight, another pair had legs that were too wide, but the third and final pair has her dancing around the room. She wasn’t sure of her size, so she ordered multiple items in different sizes. Not surprising as, 30% of ecommerce shoppers regularly overbuy with the plan to send back the items that don’t fit.
Later that day, Micheala packs me and the other pair of jeans to be returned into the shipping box we came in along with the return label provided. I am disappointed, but not surprised as almost a quarter of returns (24%) happen because the consumer changes their mind, while 65% of returns are due to an error made by the retailer. In our case it's 100% consumer-driven.
First Stop: The Collection Box
Because the retailer provided free return shipping, Micheala dropped our package off at the collection box – no waiting in line to pay for shipping. Listening to the workers emptying our bin, I was surprised to learn that only 49% of retailers offer free return shipping, despite 79% of shoppers wanting free shipping.
While waiting to be loaded into a truck for a ride to the next stop, I struck up a conversation with other return packages. I learned that some stores are reducing returns by encouraging shoppers who buy online to pick it up at their local store (aka BOPIS). This process benefits both consumers and retailers. Retailers save on return shipping costs and avoid the risks of lost or stolen packages; while consumers get their products faster and have the opportunity to touch, feel and try on in-store before making the purchase. If my retailer had offered Michela this option, then I wouldn’t be travelling 360 miles round trip in a box adding to the carbon footprint. I wonder if she is concerned about that.
Surprisingly, only 50% of returns are able to be resold at full price according to Gartner Research. This leaves retailers short having paid for two-way shipping and additional mark-downs.
In-Transit: Delivery Truck to Warehouse
I take a tumble when they unload the bins, and the package rips. I hear a familiar sound and then feel cold raindrops hitting the package, sneaking through the hole and getting me and the other jeans wet as we wait to be loaded into the shipping truck
After I’m moved among several trucks, my journey stops, and I’m glad for the break. However, the hours of sitting in the warehouse turns to days and weeks. It appears that I’ve been lost. I learn from other packages that I’m not the only one who’s had some misadventures.
A pair of workout shoes tells me that he was stolen off the porch, which seems to be pretty common as 43% of consumers had a package stolen in 2020, an increase from 36% in 2019. Finally, an employee comes looking for me when the retailer and customer (Micheala) tracked down the package. Everyone was frustrated – me, Micheala and the retailer. If only there were a way to prevent these errors.
Almost Back to the Store
Arriving at the retailer’s warehouse, I find myself with many other packages who also have been all over the country and sent back – some never even made it to a shopper. But I am hopeful to get unpacked and back on the floor to find a new buyer. By the time I finally arrive at the retailer and get unpacked, I am a bit smelly from the rain-soaked cardboard.
And since the journey took weeks longer than expected, it’s past my prime selling season, so even if I were in shape to put back on the floor, it is time to mark down the jeans for a spin on the sale rack. Surprisingly, only 50% of returns are able to be resold at full price according to Gartner Research. This leaves retailers short having paid for two-way shipping and additional mark-downs.
Back on the Rack
As I was pulled from the restocking pile by an associate, she paired me with a leather jacket who told me about another retailer that lets shoppers buy online and return in the store (a.k.a. BORIS). She told me this saves time, money, and hassle for everyone. Even better, the retailer offered the shopper an incentive during the return to make another purchase. The customer left happy, and the retailer put return dollars back into the store – a win-win.
In spite of this exhaustive journey, I was relieved to learn that there is a better way than what I had been through. I hope that my retailer learns about BOPIS, BORIS and adding incentives to make the process easier for everyone involved, while saving time, money and helping to reduce the carbon footprint.
