Online sales and increased returns
With an increase in online sales, we have also seen an increase in returns. In fact, returns averaged 16.6% of total U.S. retail sales, which soared to $4.583 billion in 2021. Comparatively, the return rate was 10.6% in 2020, according to a survey by the National Retail Federation and Appriss Retail.
At this rate, returns totaled more than $761 billion in merchandise that returned to stores.
Purchases meant to be returned cause several problems for businesses
Ease of online shopping makes it easy for customers to purchase multiple sizes or different colors of the same item to ensure that one will fit perfectly. And without the ability to try on items like clothes and shoes, overbuying with the intent to return is a simple and effective solution for consumers. But not for business – not only does half of the purchase end up in stores soon after, but it takes extra labor to sell the item and then put it back in stock. Or worse, review returned items to determine which are defective, resalable, or sometimes even ineligible for return because they have been worn or used. The report says that for every $100 of returned merchandise accepted, retailers lose $10.30 to return fraud. Looking at holiday returns alone, fraudulent returns amounted to $17 billion.
On top of that, over-purchasing leads to lost sales. Items or sizes that were purchased with the intent of being returned are temporarily removed from a store’s inventory, making them unavailable for a period of time to other customers who may really be looking for those sizes. . This loss is very difficult to measure because customers simply come and go without making a purchase, and often without asking to be put on a waiting list to be notified when the size becomes available.
Processing costs and the increased volume of returns were cited as one of the biggest challenges retailers are currently facing.
Retailers offer solutions
Some retailers are offering alternative solutions to try to stem the influx of returns – such as open box prices, which are marked-down items that have been sold, opened by the consumer, and then returned, but are in salable condition. It’s a win-win in some cases because the company can still make a profit on the item and the customers can get a deal.
In other cases, businesses reimburse customers for their purchase and tell them to donate or keep the item. This eliminates return shipping costs and reduces losses in some cases, even if a full refund is given to customers.
Opportunity to interact with customers
While the cost of returns impacts businesses in many ways – from lost sales to increased labor costs and even additional markdowns – there is a way to recoup some of the loss.
“As total retail sales continue to accelerate due to sustained consumer demand during the pandemic, it’s no surprise that the overall return rate has also been impacted,” said Mark Mathews, vice president. President of Research Development and Industry Analysis at NRF. “While retailers have reported seeing an increase in returned items in-store and online, the upside is that it also provides them with additional opportunities to connect more with customers and provide a positive experience.”
In-store returns can be seen as an opportunity to convert online shoppers. Since the returns process brings customers physically into a store, this can be the best time to go the extra mile, find out what they were looking for and perhaps didn’t initially find, and build relationships to win a loyal customer. However, this is a skill that requires careful training from store associates, as there is a fine line between offering services a customer will appreciate and bombarding them with sales pitches when they try to return. something and get out quickly. A very simple and courteous return process can also gain credibility and positive perception of a brand if that’s all the customer needs at the time.
“Retailers need to rethink returns as a key part of their business strategy,” said Appriss Retail CEO Steve Prebble. “Retail is facing an influx of returned items. Now is the time to stop viewing returns as a cost of doing business and start viewing them as a time to truly engage with your consumers.