Many Happy Retail Returns
Luckily, retail returns provide stores a chance to flex their customer service muscles and turn disappointed shoppers into happy, loyal customers.
Returns on the rise
The rise in merchandise returned to stores can be closely traced to the increase in e-commerce and the huge jump it took during the pandemic. Many brick-and-mortar retailers added e-commerce shopping options to keep the cash registers ringing while their doors were closed. Online spending increased over 32% in 2020 in the United States which accounted for 14% of total sales.
While that spending was a boon to retailers struggling to stay afloat during the pandemic closures, returns of e-commerce items more than doubled from 2019 and were a major driver of overall retail returns.
“Last year, we saw an increase in returns of online purchases as the pandemic forced more consumers to shop online,” said Mark Mathews, NRF’s vice president of research development and industry analysis. “Retailers view the return process as an opportunity to further engage with customers, as it provides additional points of contact for retailers to enhance the overall consumer experience.”
Return fraud complicates the explosive increase in the number of retail returns. Last year, approximately 7.5% of the returns were fraudulent to the tune of $102 billion.
Top E-commerce Return Rate Statistics
In 2020, return deliveries were estimated to cost $550 billion.
- Online Shoppers who returned a purchase in the last 12 months 48% 48%
- Retailers Who Adjusted Their Return Policies During the Pandemic 40% 40%
- Percentage of Online Purchases the end up Returned 40% 40%
- Consumers in 2020 Expressing Hesitancy to Purchase Online Because of Return Worries 44% 44%
- Online Shoppers Who Say Return Experience Affects Their Likelihood of Repeat Purchases 73% 73%
Bad online shopping behavior
Free shipping, especially free return shipping, offered by Amazon and other e-commerce giants is partly responsible for the exponential growth of retail returns.
It has also led to some bad online shopping behavior such as bracketing purchases. That’s when customers buy two or three sizes of the same product to make sure they get something that fits. Then they return the items they don’t want.
A survey from Navar, a direct-to-consumer customer experience platform, found that more than 60% of shoppers are bracketing online purchases knowing they will return most of the purchases. The study shows that practice has increased 50% over three years.
Average return rates vary by category, but apparel typically has the highest rates with 30 to 40 percent returned. “Shoppers return 5 to 10% of what they purchase in stores, but 15 to 40% of what they buy online,” David Sobie, co-founder and CEO of Happy Returns tells CNBC.
More learned behavior
During the pandemic, many businesses adopted programs like click-and-collect, buy online, pickup in-store (BOPIS) and buy online, return in-store (BORIS) to remain operational. These programs combine online purchases and at-location pickup. While these programs successfully kept many businesses running, they also opened them up to new kinds of return fraud. The retail industry loses about $24 billion annually to return fraud.
Returns are a good thing
While taking merchandise returns isn’t exactly the objective of retail sales, they aren’t the worst thing for a business. Retail returns provide stores a chance to show off their customer service skills and are ways to get to know their shoppers better.
The most loyal customers often make the most returns.
Retail returns can be managed and mitigated.
Returns are an opportunity to turn occasional shoppers into loyal customers.
Returns create opportunities to upsell or make additional sales.
Customer Return Policies
Every store should develop a return policy before it sells a single item because roughly 10% of everything sold will be returned.
“We recommend retailers keep their return policies as simple and seamless as possible to earn customer goodwill, rather than making them difficult in the hope of preventing some returns,” Sridhar said. “The long-term customer goodwill earned is likely to easily offset any short-term gains by preventing returns.”
A store’s return policy needs to be clear, easy to understand by both customers and staff, and effectively communicated.
The effectively communicated portion of the solution is simple. It needs to be posted at every checkout counter and, with the help of a point-of-sale provider, printed on every receipt. Putting it on receipts automatically eliminates potential conflicts.
There are a few basic rules that stores can incorporate in their retail return policies.
Receipts are key
Stores must first decide whether or not receipts are required for retail returns. Receipts prove where merchandise was purchased and allow a store to accurately track its merchandise and transactions. Two rules of thumb about receipts are:
No returns or exchanges without receipts.
Returns without receipts are accepted, but only for store credit.
Identification builds customer relations
Many businesses require customers to have some form of identification when they return products. A driver’s license or state-issued ID card are examples. For stores operating on point-of-sale systems, this allows them to identify customers who return products often. It also:
- Protects against return fraud.
- Allows stores to collect information about their customers.
- Helps stores identify regular shoppers, which can lead to a better relationship with their customers.
- Helps stores streamline their return policies which makes them more customer friendly.
Many stores, especially during the holidays, add a time limit to their return policy. Returns of online purchases during the 2020 holidays increased 41% over the previous year, so requiring products to be returned with 14, 30, 60, or 90 days can help stores maintain some level of sanity in their inventory management and bookkeeping.
Items Most Returned
A National Retail Federation survey found that for every $1 billion in sales, the average retailer incurs $106 million in merchandise returns.
How stores provide refunds can vary depending on whether or not a customer has a receipt. They can be:
- An even exchange – returning the wrong item or a defective item for a new one
- A cash refund
- A refund on a credit or debit card purchase
- A refund for store credit
The fewer restrictions, the better the policy. However, the return of discounted items, close-outs, or in-stock merchandise should be clearly spelled out in the retail return policy.
The way a store handles its retail returns is a direct reflection of its customer service. A smooth, streamlined policy is going to result in more happy customers and more business.