Skyrocketing return rates are throttling retail’s bottom line.
The rate of retail returns leaped 78 percent last year, according to a new study from Appriss Retail and Incisiv. Shoppers concerned about inflation might be more likely to change their minds about their purchases.
Digital commerce growth could inflate return rates “exponentially,” as online returns triple or quadruple the pace of in-store returns, according to Appriss. And with every reversed transaction, retailers lose revenue and instead take on processing and inventory holding costs.
The survey of more than 130 retailers found that 83 percent want to improve returns moving forward. Still, just 29 percent have a strategic returns management program in place, and even fewer (21 percent) believe their current processes are effective. Similarly, 77 percent of respondents said they wanted to streamline reverse logistics costs, but just 29 percent feel that they’re making progress toward that goal.
Meanwhile, 91 percent reported that give-backs are accelerating faster than revenue. Most (69 percent) said they don’t understand the root cause of the returns. Even though 64 percent of retailers reported that returns are an issue they’ve been tasked to take on, only 27 percent have appointed an executive to manage returns performance.
“Retailers spend millions of dollars trying to increase traffic to their stores and websites, yet many are missing a key engagement opportunity at the point-of-return,” Appriss Retail CEO Steve Prebble said. Throughout the returns process, “retailers work directly with the shopper, giving them the opportunity to reinforce the brand experience.”
“In this encounter, retailers can encourage shoppers to spend their refund dollars in-store or online, which recovers the lost revenue and strengthens the relationship,” but not enough retailers are taking the steps needed to keep consumers engaged.
“Now is the time for retailers to optimize the returns process and find new ways to improve the customer experience during their purchasing journey and at the point-of-return,” Incisiv chief insights officer Gaurav Pant added.
To do this, retailers have to stop flying blind. Appriss encouraged merchants to take control of the issue at the outset by optimizing the online shopping experience to increase customer satisfaction. Digital technologies that provide fit guidance and other product information can help shoppers make more informed purchases and reduce bracketing—the practice of buying a product in multiple sizes with the intention of returning all but the one that fits. Just 22 percent of the retailers queried said they were currently using such tools.
Retailers should also leverage data analytics to serve up highly relevant product recommendations, discounts and other offers, and look to historical data to detect ordering anomalies and identify high-risk purchases. For example, 6 percent of retailers recommend shipping insurance to customers with a higher than average amount of lost order claims.
And while e-commerce is driving much of retail’s sales growth, brick-and-mortar stores can play a critical role in the shopper’s journey. Appriss recommended that brands utilize their stores not just as venues for making sales, but as service centers. Nordstrom Local, the department store chain’s small-format locations, allows shoppers to pick up and try on online orders, and lowers logistics by handling returns and exchanges. While these types of operations can cut costs and quickly get salable products back onto store shelves, just 17 percent of respondents said they routinely encourage consumers to visit their stores for product trial or discovery, and only 29 percent incentivize them to make in-store returns.
Personalizing the returns process could nurture continued customer loyalty. Discount shoe retailer DSW gives its VIP Gold members 90 days to make returns, while VIP Gold Elite members get a whole year. Loyalty tiers are based on past purchase volume, giving shoppers with greater potential lifetime value more perks. Redirecting returns into exchanges can also “save the sale,” Appriss said. This can be done by offering buyers options like extended store credit or exclusive deals on their next purchase. But currently, just 21 percent of retailers employ these cost-saving strategies.
“The research makes it clear that retailers can benefit from flexible returns policies, as well as intelligent pre-purchase strategies designed to reduce the chance of returns,” Appriss said. “With advances in machine learning and artificial intelligence, retailers now have options to adapt policies and incentives in ways that were not possible in the past.”