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E-Commerce Return Rates Expected to Exceed 30%

E-commerce may be growing at a rapid rate, but so too are the inevitable returns that accompany them.

This holiday season, e-commerce returns are expected to reach $19.4 billion, or more than 30 percent of the $64.7 billion in projected e-sales, according to a recent study by Shorr Packaging.

At brick-and-mortar stores, return rates can average a much lower 8.89%, with apparel being returned 9.96% of the time and footwear 9.13% of the time.

The returns process is one part of the shopping experience that still has stores winning over websites.

If sending a product back is overcomplicated or inconvenient, 85 percent of today’s ease-seeking shoppers said they wouldn’t repeat business with the retailer (40 percent of e-commerce consumers have kept a product they didn’t want just because returning it was just too much hassle). Ninety-five percent, on the other hand, said they would frequent a company with a simple returns process in place.

Here’s what consumers want when it comes to giving back unwanted goods: 62 percent want a return label to come with their order, 61 percent would like to see easy-to-print return labels, 57 percent want automatic refunds and 47 percent want the whole process to be easy to follow.

And along with the required simplicity, consumers overwhelmingly want retail returns to be free—just as most demand shipping should be. Two out of three shoppers said they would do more e-commerce business if the returns were free.

A UPS white paper on the pulse of the online shopper, found that the number of shoppers who check a return policy before making a purchase has increased steadily in recent years—in 2013 63 percent of consumers would survey the policy pre-purchase, and this year that number has climbed to 67 percent.

“As this increases, it’ll be tougher for retailers to ask consumers to pay for returns,” Jim Burns, a sales manager at Shorr said.

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If retailers could improve in five key areas—accurate product portrayal, fit, pick-and-pack, damages and return windows—customers might cut back on returns.

Twenty-five percent of returns are made because a product wasn’t what the purchaser expected, and fit-related issues account for 17 percent of send-backs.

When online fashion purveyor Asos introduced a sizing app that compares items the consumer already owns with items they are currently viewing, return rates fell 50 percent, the report noted.

Pick-and-pack problems that lead to shipping the wrong goods altogether cause 16 percent of returns. E-commerce pet supply company Drs. Foster and Smith introduced paperless scanners to curb its packing errors and saw a nearly 75 percent reduction in returns.

Damages make up just 5 percent of returns, but 58 percent of shoppers said they wouldn’t purchase from a retailer again, or would visit a competitor if they received an item that was damaged.

Incorporating an extended return window, according to Shorr, is a strong trust signal for consumers and another way retailers can increase consumers’ inclination to buy. Clothing retailer 3rd Power Outlet extended its return policy from a 14-day window to a 90-day, which led to both a decrease in returns and a pick-up in sales.

As Shorr noted, companies asking customers to foot the bill for return shipping have seen sales decrease as much as 74 to 100 percent. Companies that allow for free returns have seen between a 58 and 357 percent boost in sales in the succeeding two years.

With numbers like that, it’s a wonder any retailer would retain complex and costly returns processes.

But as Burns explained, there are three major reasons more retailers haven’t simplified the process.

“The first is the up-front cost—supplying additional packaging required to streamline returns, and paying for return freight adds up,” he said. “Secondly, retailers would simply prefer if customers kept the items, and they think that if it’s harder to make a return, then the returns are less likely. What’s more, this kind of cost is easier to calculate than the return a brand sees in the medium- to long-term thanks to increased customer loyalty.”

Lastly, he added, “Retailers with physical locations want customers to return in-store. Retailers are always trying to drive traffic to brick-and-mortar locations. If you have to return at a store, maybe you take that credit and buy something else right there.”

That line of thought errs on the antiquated side when it comes to retail today, however. The initial investments in streamlining returns may be lofty, but as Shorr explained, here’s why simplifying the process proves effective for retailers:

  • You’ll attract more customers if returns are free and as easy as they are in traditional stores.
  • You’ll sell more because consumers are willing to buy more if guaranteed no-hassle returns.
  • You’ll lose fewer sales as shoppers will be less likely to abandon a purchase due to poor return policies.
  • You’ll differentiate yourself. At the beginning of 2014, only 10 percent of retailers offered no-cost shipping on returns.

Now, as the National Retail Federation found in a recent study, roughly 49 percent of retailers offer free return shipping.

“It’ll take time,” Burns said. “With more and more retailers deciding to streamline the returns process, easy returns will become something a consumer simply expects – just like free shipping.”