In December UPS anticipated a whopping 26 percent year-over-year surge in the number of returns it would process on January 2, National Returns Day. Those levels would represent the seventh consecutive record number of returns. The surging rate of returns is occurring largely due to strong online growth. Estimates for returns of online purchases range from 15 to over 30 percent, with items such as apparel and footwear at the high end of that range. The return rate for physical stores ranges from three to 10 percent.
UPS touted solutions it provides to manage the return process, including numerous drop-off points and pre-paid labels for consumers. For retailers, UPS offers visibility to anticipate impacts to inventory and the ability to route returns for repair, repackaging or restocking.
Several recent articles detailed the complications involved in mastering reverse logistics or transporting items from buyers back to sellers. These include the fact that:
Some retailers are seeking to offset the cost of online returns by choosing not to provide prepaid mailing labels, requiring a receipt unless an unwanted item is carried to a store and threatening to ban serial returners. The trend overall, however, has been toward less strict return policies that engender goodwill.
Discussion Questions: Do you predict that return rates will continue to climb in the years ahead? Is a high return rate the inevitable cost of doing business online — and worth it? What solutions best mitigate the inherent costs?
Comments from the RetailWire BrainTrust:
Combine free shipping and returns with wildly unpredictable sizes (even for men) and you’ve got a returns issue. The industry has to make some decisions about either standardizing sizes, or coming up with better descriptions beyond customer reviews.
Cathy Hotka, Principal, Cathy Hotka & Associates
Return rates probably are out of control and that is because return policies are too liberal, period.
Bob Amster, Principal, Retail Technology Group
AI and other enabling technologies should help with the reduction of return rates in the future. These may include virtual stylists, applications designed to use body scans to best size products for customers, or chatbots that help with selecting the right size for products. The enabling technologies that use machine learning to help style select can also minimize returns by using data to pinpoint which styles are best for customers. Returns will always be a cost of doing business and will not be eliminated but companies can continue to work to reduce the number of returns with today’s and future technologies.
Shelley E. Kohan, Associate Professor, Fashion Institute of Technology
Return rates will continue to rise as e-commerce takes a greater share of retail channels. We need a multi-pronged approach: from improvements in material science such that ultimate disposal does not cause further environmental harm, to next generation reverse logistics grounded in intelligent automation. The one thing I would caution is not to penalize the shopper, as this will become a competitor’s potential advantage.
Shawn Harris, Customer Partnerships & Strategy, SmartLens, NA
The costs of high return rates are the flipside of the costs of “free” shipping. Customer expectations have gotten higher and higher — driven partly by Amazon — and stores’ efforts to tighten up their return policies are going to meet with resistance. It doesn’t help matters when retailers encourage purchases of multiple colors and sizes as a consumer incentive, knowing that most of these products are going to be returned.
Dick Seesel, Principal, Retailing In Focus LLC
I do wonder how the sustainability trend collides with the returns trend. There is no argument that returns are wasteful and damaging to the environment, especially for online purchased items even when they are returned in-store. Yet the same consumer is looking for sustainably-produced goods and carbon footprint impact information. In the end instant gratification wins out against environmentalism I think for many consumers.
Kenneth Leung, Retail and Customer Experience Expert
We are training consumers to plan to return products. Why should we be surprised when they do what we’ve trained them to do? Ah, how I yearn for the “good old days” when we focused on selling good products to people in well merchandised stores without chasing the shiny baubles which capture headlines so well. Of course that world can’t exist any more. But we should note that serious return problems generally only happened when the product failed to meet expectations. But no, we shouldn’t be training customers to over-order and return.
Doug Garnett, President, Protonik
Read the full weekly consensus