Easing the returns burden on US retailers
Buying online may be the increasingly fashionable way to shop yet returns are still causing retailers a headache, despite new ways to simplify the process.
“Americans wouldn’t shop and spend nearly as much as they do if they weren’t able to return merchandise,” says Karen Raquet, Director, Retail Property Management at JLL. “As e-commerce buyers can’t first inspect, try out, or try on items, a consumer-friendly returns policy becomes essential for getting online shoppers to the checkout page.”
But returns come at a big cost to retailers; they might get a mere 15 cents to 30 cents on the dollar on returned merchandise. And in some cases, retailers throw out returned goods or sell them to liquidators, options which are often more attractive than processing returns themselves.
Return rates, which swell during the holiday season, can be as high as 30 percent for online sales and up to 40 percent for apparel items, making this an enormous problem for online retailers. In comparison, bricks-and-mortar stores have an 8 percent return rate — 10 percent during the holiday season.
The challenge for online retailers is figuring out ways to make the return process easier for the customer while keeping losses at a minimum. Big mall owners Simon, Westfield, and Macerich are experimenting with a new type of returns kiosk from Happy Returns currently in six major metro centers in the U.S. Here, shoppers can return online purchases and get an instantaneous refund, which they often spend at the mall.
“Initiatives like return kiosks in malls are ultra-convenient for the consumer and very good for the bricks-and-mortar facilities because they lead to increased traffic,” says David Hull, Senior Vice President and Regional Leasing Director for JLL’s Retail group. “If someone is coming to the mall to return an item, there’s a pretty good chance they’ll buy something else while there, whether that’s a replacement for the one they’ve returned or maybe snacks and drinks.” In fact, almost one-third of refund money gets funneled back into the mall this way, David Sobie, CEO of Happy Returns, tells Chain Store Age.
The prospect of heading to the mall rather than a delivery office to return goods has a greater psychological appeal. “Consumers can experience something positive by returning an item at the mall instead of this becoming another weekend chore that entails getting a box, putting a label on it, and driving to the post office or UPS store,” says Raquet.
In recent years logistics firms have been grappling with measures to simplify the returns process, whether offering pre-printed labels or in some cases picking up from consumers doors. However, this can still come at a cost to both consumers and retailers.
As online shopping volumes grow, reverse logistics has been a rapidly growing area with a variety of small players entering the market. Established delivery firms have been taking notice – and taking action to fill gaps in their own offering with FedEx forking out $1.4 billion to buy GENCO and UPS taking a stake in tech firm Optorowhich helps retailers to process, manage, and sell returned items on sites such as eBay and its own site called Blinq.com.
“Giving consumers choice and convenience on the reverse matters,” Steve Brill, UPS Vice President for Global Retail and B2C Strategy, tells Supply Chain Dive. “If your return rates are too low, or if you make it too difficult to return a product, you actually lose more sales. A certain level of returns is healthy. It typically means your user policy is encouraging people to buy.”
Getting customers to keep their purchases is another cost-saving strategy, and e-commerce stores continually try new methods to achieve this. The department store Nordstrom, for example, is working with an app called True Fit to help customers get a better idea of whether an apparel item will fit. Other stores might extend the return window, which research suggests leads to fewer returns as consumers get more attached to the item.
Although returns are a big challenge for all retailers, Raquet believes that returns from online purchases will remain greater than they are from stores with a physical presence. “That’s one good reason why the most successful retail combination is one of e-commerce and bricks-and-mortar,” she says.
Yet there’s still plenty of scope for further disruption to the return marketplace. “There will be plenty of copycats for return bars in malls,” says Hull. “If Happy Returns continues to focus on the major metro markets, someone will jump into the secondary markets pretty quickly.”