If there’s one guarantee in retail, it’s the inevitability of returns. Marketing, logistics, supply chain, finance – every part of your business feels the pain. And while the average consumer is unaware of the full impact, retailers know a reckoning is coming.
In this two-part series, we’ll explore the impact of returns on retailers, plus share some creative strategies for addressing the returns dilemma.
What’s making the problem worse for retailers?
Nearly every retailer struggles with returns. So, you’re in good company. However, recent trends have exacerbated the issue, making the cumbersome returns process more challenging in certain markets. Here are four reasons why the problem keeps getting worse for retailers.
More digital purchases = more returns.
The pandemic was a game-changer, causing ecommerce shopping to explode. In a survey conducted by BigCommerce, 55% of individuals stated that they purchase products online at least once per week or more.
With ecommerce, the consumer can’t touch and feel the product. They often order multiple items and only keep the one that meets their needs. This is prevalent in the fashion industry where, for example, consumers will purchase the same item in different sizes or colors to try on at home.
Here’s where ecommerce returns hit hard: The return rate for online items is 30% compared to just 8.89% for in-person shopping. The magnitude doesn’t really sink in until you dive a bit deeper. When put in terms of dollars, that’s $166 million in returns for every $1 billion in sales. The same study shows that retailers will lose roughly $10.00 to fraud for every $100.00 in returned products.
Returns add to a backlog of inventory.
The burst of online shopping, combined with supply chain disruption, caused inventory shortages…then a major backlog. Retailers still have those products sitting on warehouse shelves.
In a recent CNN article, Burt Flickinger, retail expert and managing director of Strategic Resource Group, said, “Retailers are stuck with excess inventory of unprecedented levels. They can’t afford to take back even more of it.” It’s so bad that retailers sometimes simply refund customers and let them keep unwanted items, rather than add to their growing inventory pile.
Environmental concerns are growing.
Just how bad are returns for our planet? Forbes recently shared a few insights in an article aptly named “There Is No Such Thing As A Free Return”:
“‘Free returns’ has become an industry-standard in online fashion shopping. But there is a high price to pay, which every consumer should be aware of: The heavy carbon footprint of all the unnecessary shipping back and forth.”
Recently, a study measured consumer knowledge of how retail returns were processed. Findings show that 90% of consumers assumed a returned product was immediately restocked. The reality is much different. It’s estimated that just 50% of returns go back into store inventory, with many sent to a landfill.
Consumers may not understand the full impact — but they do care. In fact, over a third (35%) say that a poor environmental track record would discourage them from buying from a brand. However, they believe that retailers must take responsibility first. Or at least start a dialogue about how to improve our collective actions.
Forbes says an important step forward is to add more transparency into your supply chain, including how products are produced, transported, and returned. Traceability data can help you identify risks and opportunities, increase your efficiency, and build stronger supplier relationships — all of which may limit the environmental impact of returns.
Ultimately, getting the right item from the beginning is the best way to curb returns. Forbes notes:
“Whether it’s about helping to find the right size or showing realistic pictures, minimizing returns will help save time, money, and carbon emissions on both sides of the shopping cart. Easysize, a technology company helping shoppers find the right size, estimates that unnecessary returns can be decreased by 25-30% when online shops start getting better at using the return data at hand to get the size right from the start.”
How will you handle retail returns?
There are a few ways you can tackle the dilemma of returns. Charging return shipping is a common approach. Other retailers like H&M are now experimenting with return fees. However, these solutions could lead to customer dissatisfaction. Consumers want the return process to be easy, and 79% of retail customers prefer free return shipping.
This presents the retailer with a catch-22: How can you reduce your losses from returns while maintaining a happy customer base?
The best way to combat returns is through prevention. Provide all the product information a customer needs, so they’re less likely to feel surprised or disappointed when opening or using the product.
What type of product information helps most?
- Accurate and detailed product descriptions, so customers know exactly what they’re getting.
- High-quality product images and videos that show the product from different angles and perspectives.
- Consistent and accurate attributes, especially related to colors, size, fit, and materials. Product comparisons also help!
- Detailed and honest product reviews from previous customers to help set accurate expectations.
- Highly relevant recommendations or “next best” products, so customers understand all their options.
In addition to preventing returns with product data, you can also find creative ways to turn the risk of returns into opportunities. We’ll explore those ideas in the next post!
Have questions about improving your retail product data with PIM, or want to kick-start a project? Get in touch today.