Online Returns Emerge as New Battleground for Retailers

Ivana V. Image
ByIvana V.
December 26,2019
Nearly 90% of shoppers say a single negative experience returning merchandise is sufficient to curtail all future purchases from the store or brand.

That’s among the data points revealing that product returns have become a new battleground for online and brick-and-mortar retailers alike.

According to product liquidators B-Stock Solutions, consumers will return up to $95 billion worth of holiday purchases this year, a 15-20% increase over last year. Nearly half of those returns are expected to come from e-commerce purchases.

While the cost of returns has always been a factor affecting retailers’ profit margins, the constant growth in online shopping has raised the stakes for online merchants. Online returns have a more severe effect on the bottom line due to the high costs of shipping, restocking, and potential discounts or write-offs if the products aren’t sold later.

In a retail market this saturated, shoppers have grown accustomed to convenience and choice when they shop in brick-and-mortar stores and online. Their next big expectation is a cheap and simple return process.

Happy Returns, a company that provides comprehensive return solutions for online and omni-channel retailers, surveyed 1,800 customers about their return expectations.

In addition to finding that almost 9 out of 10 shoppers would abandon a brand after one bad experience returning items, analysts queried shoppers about what a “perfect return experience” would be. They learned in no uncertain terms that buyers expect free shipping back to the seller.

Consumers want returns to become a no-cost, no-risk part of the shopping experience. And if retailers want to meet these demands, they are looking at substantially lower profit margins.

“The way retailers handle online returns for the holiday season is setting the stage for their customer engagement going into 2020,” said Andy Mantis, the chief brand officer at research and consulting firm 1010data.

“Return policies once were merely a necessary task of store operations. Now they’re becoming another competitive strategy for retailers to build brand loyalty,” Mantis said.

Online sellers deal with a higher percentage of returns than their counterparts with physical stores, partly because consumers can’t see and try the items.

This is especially true when it comes to clothing items. As the research by 1010data shows, apparel purchased online is sent back twice as often as items bought in physical stores.

Research cited by Statista says this year’s cost of handling returns could amount to $550 billion - a 75% increase from 2016.

Omnichannel sellers are at an advantage because they can instruct consumers to bring unwanted items to their physical stores, cutting down on retailers’ shipping costs. What’s more, this interaction gives merchants a second chance at making a sale and delivering a positive shopping experience.

Not only is this more convenient for retailers, but consumers seem to enjoy it too.

A National Retail Federation report reveals that 80% of shoppers prefer handling returns at the store. At the same time, nearly 75% say they are likely to make another purchase in the process.

A new form of collaboration among retailers

Recently, retailers with physical presence have been handling returns for eCommerce brands.

Nordstrom has set up several service hubs where customers can return items bought in other online stores. The Seattle-based retailer ships the products back to the eCommerce sellers.

Michaels Stores, a chain of art supply shop, has partnered up with UPS to let customers pick up and drop off packages at various physical locations, including CVS and Advance Auto Parts stores.

FedEx offers the same pick-up and drop-off option at Walgreens pharmacies.

Amazon has been in business with Kohl’s since July 2019, routing its shoppers to 1,000 Kohl’s brick-and-mortar stores as a part of its return procedure. Amazon’s additional return points across the country include approximately 10,000 UPS stores and about 400 of Amazon’s Whole Foods Markets.

And just as Target and Best Buy caught up with Amazon by offering free shipping for online returns, Amazon upped the ante by expanding the array of products that qualify for the free return program.

In the past, Amazon’s customers could ship footwear, apparel, and bedding to Amazon free of charge. Now they can return “millions of items for free” as advertised on the eCommerce platform, including electronics, kitchen appliances, and household items weighing less than 50 pounds.

About the author

Ivana is a staff writer at SmallBizGenius. Her interests during office hours include writing about small businesses, start-ups, and retail. When the weekend comes, you can find her hiking in nature, hanging off of a cliff or dancing salsa.

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