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69% of Retailers Treat Returns as ‘Cost of Doing Business’

Most retailers are seeing returns pile up, but few are doing much about it.

That’s according to research from Incisiv and Appriss Retail, which revealed that 91 percent of fashion companies are seeing heightened return rates. Their 2023 Omnichannel Returns Index queried 128 retailers, only 19 percent of which have return programs in place.

During 2022 alone, retail trade grew by 11 percent—and returns jumped 70 percent, the data showed. The e-commerce boom has only fueled the flood of returns, with shoppers sending back online purchases three to four times more often than items bought in stores. “Every time a customer returns an item, the retailer loses revenue and incurs processing and inventory holding costs, the customer’s experience suffers, and the environment is impacted,” the report said.

Still, the study showed that most retailers view returns as inevitable—in fact, 69 percent of respondents treat returns as a “cost of doing business.” Certain industry segments are working to make returns efficient and improve customer support. Department stores and consumer electronics retailers lead in those areas, while beauty and apparel retailers have the highest adoption of digital returns capabilities. Overall index leaders included Bed Bath & Beyond, Dick’s Sporting Goods, JCPenney, Kohl’s, Lane Bryant, Levi’s, Macy’s, Neiman Marcus, Nordstrom, QVC, Saks Fifth Avenue, Target, Walmart and Wayfair.

Today, 91 percent of apparel retailers allow returns to be initiated online, and 87 percent of department stores allow shoppers to start a return by chat. These features are important, but “despite these strategic attempts to strengthen the online returns process, most retailers have significant room for improvement when it comes to meeting shopper expectations” before a return is necessary, the report said.

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Most retailers (76 percent) display product ratings and reviews on product pages, but with 93 percent of shoppers saying they’re likely to consult these metrics before making a purchase, adoption could be higher. Only 37 percent of retailers allow consumers to provide feedback on product attributes like size and fit, while 40 percent of shoppers say sizing issues are the reason why they send something back.

“Empowering customers with complete knowledge on what they are buying and how it will look on them or fit in a space helps in reducing returns,” the report said. Retailers are increasingly using interactive digital tools like videos, filters and virtual mirrors, along with detailed reviews, and 80 percent of consumers reported feeling more assured about their online purchases when using these aids.

Though the act of returning a product can be an opportunity for consumer engagement, too few retailers are taking advantage of the upsides of another interaction with a shopper. While 82 percent of retailers allow online purchases to be returned in store, only 14 percent offer the option to schedule a return pickup. Even fewer (2 percent) offer curbside returns. And while almost all retailers display order shipment status, only 23 percent allow shoppers to track their return’s journey or the status of their refund. Only 78 percent of retailers let e-commerce shoppers replace or exchange items, forcing them to go through the returns process and re-purchase the item they want.

Appriss Retail vice president Michele Marvin said the point of return is “an underutilized customer touchpoint, despite being a pivotal opportunity to preserve shopper satisfaction.” Post-purchase leaders include retailers such as Abercrombie & Fitch, Costco, Kohl’s, Levi’s, Macy’s, Nordstrom, Saks Fifth Avenue, Under Armour, Target and Walmart, according to the study.

“When a customer starts a return, it becomes the retailer’s job to redirect them toward other products by delivering strategic messaging, promotions, and discounts designed to save the sale,” Marvin said. “When retailers invest in the returns process, they are guaranteed to see improvements in customer loyalty and profitability.”

“Retailers have been quick to embrace digital capabilities but have been slow to address the impact that returns are having on their customer satisfaction and bottom lines,” Incisiv chief operating officer Amar Mokha added. “Retailers can no longer afford to ignore returns and must take a strategic approach to reducing the cost and complexity associated with returns management.”