Returning items is not all bad

Returns have always been a normal aspect of the retail experience. However, with the rise of e-commerce, returns have presented a more complex challenge for online retailers compared to their brick-and-mortar counterparts, largely due to volatile shipping costs and logistical considerations. The unexpected surge in online shopping during the recent pandemic further compounded this issue.

A survey of global consumer return behavior reveals a slight overall return increase, from 32% in 2022 to 33% in 2023. Notably, consumers in the Asia Pacific region experienced the largest uptick in returns, rising from 32% in 2022 to 39% in 2023. This rise in returns has had a significant impact on retailers worldwide, with total returns reaching $18 trillion according to data from the IHL Group. While in the United States, total retail returns amounted to $743 billion worth of merchandise in 2023, with an average return rate of 14.5%. Notably, fraudulent activities and abuses within the returns process accounted for 13.7% of total returns, equating to $101 billion in losses. In Europe, 17% of consumers agree that they are more likely to return an item they are unsure about.

The average return rate for online transactions stands at 15.2%, significantly higher than the 5% return rate for in-store purchases. This trend holds true across all categories of retailers surveyed, with the widest disparity observed in discount department stores, where consumers returned only 6.2% of in-store purchases compared to 33.2% of online purchases.

Across categories, apparel items had the highest return rate, accounting for about 10% of total sales. This was followed by jewelry (8.31%) and electronics (8.28%) respectively. Beauty and health items had the lowest return rate, between 4%-5%, due to hygienic considerations.

Numerous factors drive consumer returns, including instances where individuals purchase items with the intent of returning them when products fail to fit or function as expected when products do not align with their descriptions, when returning gifts, or when engaging in fraudulent activities. A significant portion of online returns can be attributed to the BORIS phenomenon (Buy Online, Return In-Store), which accounted for 49.7% of in-store returns, underscoring the growing influence of e-commerce on traditional physical retail outlets. In the realm of apparel retail, consumers returned 22% of products purchased online, a figure more than three times higher than that of in-store purchases (6.2%). A survey conducted by the ICSC found that 87% of consumers who engage in excessive online shopping do so primarily with apparel items to facilitate try-ons at home and return unwanted items.

Although the factors seem to be unhappy, the provision of a lenient return policy can serve as a powerful driver of consumer repurchase and recommendation. A significant portion of buyers (54%) cite free returns or exchanges as the second most influential factor influencing their decision to purchase from a brand. The vast majority (81%) of digital shoppers in the United States review return policies before making an initial purchase with a merchant, indicating the importance of a seamless return process. Nearly half of European consumers (42% ) tend to choose retailers offering free shipping or free returns. 81% of European consumers said they tend to purchase again from retailers offering a free return policy. Conversely, over half (55%) of shoppers have abandoned purchases due to inconvenient return policies.

While offering free returns can enhance the customer experience, it also represents a considerable cost for retailers. Recently, some high-profile retailers in Europe, including Zara and Uniqlo, have implemented paid returns. Strategies to mitigate returns in e-commerce include the adoption of peer-to-peer return systems, which can reduce reverse logistics costs by encouraging customers to keep unwanted items rather than return them. Amazon and Wayfair have just begun instituting such a “keep it” policy. Retailers can also enhance product descriptions and customer reviews to aid consumers in making more informed purchase decisions, thus minimizing the need for returns. By leveraging these tactics, retailers can bolster customer satisfaction and brand loyalty while potentially boosting sales in the long run.

Either way, lowering the return rate is a win-win situation for both sellers and buyers. If you're having issues with online retail, feel free to reach out to us for some advice.????

Reference

How to Reduce Ecommerce Return Rates: Statistics and Best Practices.

Brick-and-Mortar Shopping Drives Lower Return Rate Than Online Shopping.

How much do return policies impact shopper decisions?

How retailer return policies can help—or hurt—sales goals

Ecommerce Returns: Expert Guide to Best Practices (2024)

The European Ecommerce Report 2023

2023 Consumer Returns in the Retail Industry