The e-commerce returns problem & the perfect e-commerce returns process
By FarEye | October 13, 2022
The Returns Conundrum
As online shopping continues its impressive growth, so too do e-commerce returns. Fueled by pandemic-induced lockdowns and the shuttering of brick & mortar retail, online shopping became the only way for many consumers to buy goods from nonessential retailers. As the pandemic subsides, consumers are still turning to their computers and mobile devices for shopping, realizing the convenience, greater product assortment, and better price selections that online shopping provides.
However, a crucial area where online shipping falls short is the ability for consumers to see, feel, and temporarily experience many of the goods they purchase. Consumer satisfaction is thus compromised when a sweater purchased online is experienced for the first time and fails to meet expectations. Thankfully for consumers, most retailers offer online returns policies. And consumers are using them. Around 30% of online orders are returned, compared to 9% for items purchased in-store.¹ Many consumers have gone so far as to order multiple amounts of the same item in different sizes and styles with the intent of selecting only one and returning the rest.
This is causing major headaches for retailers and their logistics partners as returns are costly and difficult to orchestrate. Even some of the biggest retailers in the world now see rampant returns as an existential threat, says the Atlantic.³ It is estimated that $1.3 trillion worth of retail goods are returned each year globally, boosting the growth of the reverse logistics market that is forecasted to reach $822B by 2025.⁴ That sweater you don’t like is an expensive problem for retailers worldwide.
When shopping online, consumers must weigh additional criteria that retailers set that they do not need to consider when shopping in-store. Shipping speed, cost, delivery windows, and flexibility (e.g. curbside pickup, home delivery, parcel locker) are all factors consumers are looking for when they choose where to shop online for a particular product. Nearly half of all online shoppers returned an online purchase in the past 12 months.² Increasingly, returns policies are entering the consideration set, as 86% of shoppers look for an easy returns process and 92% of shoppers will repurchase something if returns are easy. In contrast, 81% of online shoppers will switch to a competitor if they have a bad returns experience.⁵⁻⁶ In short, the returns process is crucial for many consumers and retailers are actively taking note.
Consumers are driven to shop with online retailers that offer free returns shipping, convenient locations to return items, clear communication and visibility of the returns process, and fast refunds. Fees, slow returns process, and lack of returns visibility deter consumers from shopping online retailers.⁷
So what does a perfect returns process look like:
Pre-paid return label
Long return window
Many convenient drop-off locations, including consumer’s home
No receipts needed
Limited carbon footprint
When customers know that they can get their money back just as quickly as they can spend it, and in a fast and flexible process, they’ll shop with more confidence and spend more.
Getting the returns process right and giving consumers a returns process worth coming back for is difficult for retailers. Returns are costly even before the shipping process is accounted for, costing retailers on average $10-$20 per return before shipping.⁸ Many times, merchandise must be written off and discarded, and there are an increasing number of abundant cases of fraudulent returns, where consumers are sending the wrong items back or items that have been worn repeatedly. The entire process is time and labor-intensive and “kind of gross,” says Tim Brown of Georgia Tech.³ 57% of retailers claim that dealing with returns has a negative impact on their business, while 31% stated that managing returns had impacted their profitability.⁹⁻¹⁰ The timeliness, orchestration, fraud, and customer service are each pain points of the returns process that retailers experience and are making efforts to solve for.
Amazon, for example, has partnered with Kohl’s to allow its customers to return online purchases in-store at any of the many of the brick-and-mortar stores in Kohl’s footprint. Asos, an online fashion retailer in the UK, encourages consumers to order many items online, allowing them to try before they buy, only paying for what they keep. Walmart, one of the largest global retailers, acquired virtual fitting room company Zeekit, allowing consumers to see how potential apparel purchases look on the consumer before they click the ‘buy now’ button. Innovative ideas such as virtual fitting rooms can reduce the number of unwanted items consumers purchase and return.
Logistics providers are also interested in the returns process as many retailers use their services to complete returns. XPO Logistics, for example, is creating a platform to automate online returns management for clients in France. FedEx has partnered with tech-focused Happy Returns to streamline reverse logistics processes. Similarly, UPS has partnered exclusively with Optoro, a tech-enabled company that is transforming the way the nation’s leading retailers process and sell their returned and excess inventory.
The solution to the online returns conundrum lies in innovative technology and enhanced partnerships between shippers, logistics providers, and tech-enabled platforms. A perfect solution can offer free, fast, flexible, and sustainable returns to consumers and low-cost, resource-light processes for retailers, ensuring both parties are satisfied. Route orchestration and optimization can increase capacity utilization for trucks carrying less than a full load to take on return deliveries. Retailers can enhance the use of their many omnichannel nodes to accommodate returns, utilizing technology to determine which products should be sent back to where. Visibility technology can boost the communication between retailers, carriers, and consumers, alerting consumers in real-time when their return is processed, and refunds can be made. Each of these technology solutions will enhance the returns process by increasing speed, lowering costs, and maximizing flexibility while minimizing the impact on the environment.
A more significant problem may loom in the future, however.
Suppose retailers can get the returns process right by offering free, fast, flexible, and sustainable returns. In that case, online consumers might just be more inclined to return even more online purchases, creating even more extensive, long-term problems for retailers.
The Atlantic. “The Nasty Logistics of Returning Your Too-Small Pants.”
Allied Market Research
The Wall Street Journal