The cost of e-commerce returns for merchants | Article


When so many retailers offer free returns, people can easily be lulled into thinking there is no cost. Business leaders are quickly realizing that is not the case, with reports showing that returns ‘reverse logistics’ are costing UK retailers £60billion a year. So what is causing this outbreak, how is it affecting retailers, and what can they do to combat it?

Packaging suppliers DPack recently investigated the impact of returns and which retailers handle them best (and worst). Based on this research, the company offers tips for retailers on what they need to know about the cost of e-commerce returns.

The status of returns

Retail is the backbone of so many economies and the shift to online shopping was always going to trigger waves that we might not notice until years later. If you’re already running an e-commerce business, you’ve probably felt the impact returns have on your bottom line.

When buying online is so easy, people expect returning what they bought is just as easy. In the early days of online retail, companies offered free shipping and returns to convince people to buy online when it wasn’t so common. Now that e-commerce accounts for 28.9% of retail in the UK, according to the Center of Retail Research, many businesses are burdened with this promise of free shipping. If they remove it, they fear that customers will take their money to a competitor who offers it instead.

That leaves many businesses sorting millions of returns out of their own pockets, and that cost is in the region of £60billion a year for UK retailers. It’s also a problem in America, with 3.5 billion products being returned a year, representing an estimated $120-150 billion in value during the holiday season alone.

Although people may cite damage as a reason for returning an item to save face, it seems that products generally come back in great condition. In an interview with the BBC, a returns department revealed that when they put returns through a verification process to see if they’re damaged or reusable, “around 95% pass the first time”.

How does this affect retailers?

If you do e-commerce, returns are likely straining your operations. According to Paula Rosenblum, retail analyst at RSR Research, retailers are losing a third of their revenue in returns. Apart from the financial balance sheet, there is also a question of space.

Warehouses in the UK are already being pushed to capacity. The addition of stacks of technically used inventory, which in most cases require additional legwork to resell, adds a huge burden to the shoulders of many businesses.

Fashion retailers in particular are struggling. While many people now trade the “privacy” of a thin sheet of fabric in a busy store for the safety of their own home, people simply can’t try on clothes before buying them online. Inconsistent sizing (a woman might fit a size 8 in one brand and a size 10 in another) is one of many factors that means 19% of consumers buy multiple variations of the same item, so they can simply return the one that does not suit them. in shape.

No matter what industry you operate in, low returns can also massively affect your reputation.

DPack’s research on returns has shown the importance of free returns and quality return policies for consumers. 9 out of 10 retailers surveyed offered free returns, while companies with the top three ranked return policies also had the three highest TrustPilot scores.

Claire Leech, Managing Director of DPack, says: “Companies have already admitted to increasing the cost of their items to compensate for lost revenue due to returns. We think we could start to see more companies introduce return fees like Next is doing now.

The promise of free returns even has less practical, but equally important implications.

Laura Morroll, LCP Consulting’s management consultant, had this to say about returns: “Customer research conducted has revealed that the offer of free returns is seen by customers as a statement of brand confidence. There is something reassuring about shopping on an online store that is sure enough of the quality of its products to be happy to offer free returns.

What retailers can do to minimize return losses

According to uShip, 1 in 5 online purchases arrive damaged. So retailers can do a lot to minimize their damage from a financial standpoint here. Packaging should be your first defense against returns, so make sure it protects the product.

One way to do this is to consider its entire journey from A to B. Can the packaging support other items placed on it when stacked in a truck? Could the vibration of a conveyor belt dislodge components or screws? Just shaking the box to see if it feels secure could be costing you money you don’t want to lose.

Not only the packaging itself, but the act of putting the product in it also needs to be reviewed. Poor tools or processes could cause unnecessary damage to the packaging site, even before it has been shipped and has to deal with outside forces. Of course, you’ll probably never know if these accidents happen on the road or in-house, because you won’t get any damage information until they’ve been shipped and opened by the consumer. Then you welcome bad reviews, social media slander, or the logistics of a return.

It can be helpful to think of online product listings as a new form of packaging for the modern shopper. After all, this is what they are exposed to before they even interact with or buy the product. With that in mind, you should have clear images of your products from several different angles, in addition to detailed text describing it. Not only is it good for giving the user a clear idea of ​​what they’re buying and minimizing surprises, but it’s also good for optimizing your page for search engines.

A simple and easily accessible return policy should also be available. Users should be able to access it no matter what page they’re on, as DPack’s research found that customers like having the policy linked to a website’s footer so they’re always on the lookout. one click away. This can prevent people from sending returns when the window to do so has passed, or sending back the wrong materials and introducing even more steps into this logistical minefield.

Finally, encourage feedback from your customers and pay close attention to their issues. While there may be comments that are unfair, inaccurate, or simply cannot be addressed, you should always look for anything actionable among them. This may mean paying closer attention to your inbox or reading and responding to reviews on TrustPilot.

What might change in the future?

While there is clearly a huge financial cost, there is also a cost beyond mere currency: carbon. As if enough of a footprint wasn’t created by putting products in the hands of customers, bringing them back to where they came from essentially doubles that impact.

Many retailers also opt for simply dumping these returns, as this may be the option that requires the least amount of legwork. Why bother cleaning, classifying and revising products when you can just throw them in a landfill? This results in a load of 2.2 billion kilograms on the planet each year.

This can end in government intervention, forcing companies to reconsider how they handle returns. There’s also a good chance that in a few years, consumers will look back and think how lucky they were to have free returns from so many companies. Either that or they retain the allure of free returns at the expense of rising product costs.

Either way, it is the consumers who may have the greatest role to play in this area. Not those who simply buy online, but the one in five of us who buys with the intention of returning. We hope these people realize that shoes they don’t quite like that shade of black don’t always end up being resold, but in a landfill and adding to the stats every e-commerce retailer has to seriously consider.


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