By one estimate, returns cost retailers around the world more than half a trillion dollars a year; by another, that amount will soon exceed a trillion dollars a year.
Not surprisingly, the staggering costs of returns means that retailers spend lots of time, money and energy trying to minimize returns. Some even rely on companies that specialise in returns management.
This of course isn’t inherently a bad thing. Retailers should try to minimize returns that are attributable to factors such as inaccurate product information, poor sizing guides and lackluster customer service as in many cases these returns can be prevented.
But looking at returns more broadly, a new report suggests that instead of treating them as a scourge, retailers might be wise to embrace them.
According to Klarna’s Rethinking Returns report, returns “are now becoming completely ingrained in the DNA of how we shop”. Indeed, a whopping 82% of the more than 2,000 UK shoppers it polled indicated that returns are a “normal part of shopping.”
Online, this makes some sense. After all, when buying products sight unseen, some percentage will naturally fail to meet expectations. Clothing doesn’t fit, the color of a pillow in real life looks different than it did in online photos, and so on and so forth. In many cases, only so much can be done to prevent returns based on these kinds of factors.
For retailers, a 14% increase in the number of shoppers returning products purchased online combined with the growth of online sales as a percentage of total retail sales is a problem. For customers, it means that returns are now, in Klarna’s opinion, “one of the most important parts of the customer experience.”
Klarna also believes that in the challenge of returns lies opportunity. Specifically, it suggests that retailers willing to embrace returns and make it easier for customers to complete them can realize increased purchase frequency, cart values and loyalty.
Klarna bases this view on several data points:
- Two-thirds of the shoppers it surveyed cited free returns as an “essential” factor when selecting a retailer.
- Over a quarter (78%) claimed that free returns will cause them to buy more from a retailer over time.
- Nearly two-thirds of shoppers said that they won’t buy from retailers not offering free returns.
- 84% indicated they won’t purchase from a retailer with which they had a poor returns experience.
Clearly, free returns are a big deal but consumers expect more than just free. Klarna found that just as consumers want fast and painless when it comes to purchasing and receiving their products, they want the same when it comes to sending them back.
They also desire flexibility and convenience. For example, 84% of the shoppers Klarna interviewed said they want the ability to make returns online or offline, and 42% said they’d be more likely to purchase from a retailer offering the ability to return online orders to a physical location.
This hints at why Amazon, which has a limited brick-and-mortar footprint, this year partnered with Kohl’s to allow its customers to return orders to Kohl’s locations. Some believe that pushing in-store returns can even be profitable as return visits provide an opportunity to drive new purchases. But the verdict on this is still out and right now, embracing returns might be easier said than done.
While it’s clear that consumers expect the ability to conveniently and flexibly return products at no cost, and may be willing to patronize those retailers that indulge them, it’s not clear that retailers will be able to do this in a financially-sustainable fashion.
Returns do have a cost and for some retailers, the cost might be unbearable.
Complicating matters is that not all returns come from purchases made in good faith. Some customers purchase more items than they know they will keep so that they can compare products and make a final decision. Even worse, in the apparel market, some consumers purchase clothing with the intention of wearing it once and returning it. So-called wardrobing or ‘snap and send back’ is often driven by social media and represents an especially inconvenient part of the new shopping culture.
In an effort to crack down on these behaviors, a growing number of retailers are fighting back. Some are banning serial returners and others are changing their returns policies. Earlier this year, Asos announced that it was doing both. As part of its changes, the retailer increased the amount of time customers have to return items from 25 to 45 days, but will only allow customers to receive store credit for returns made after 25 days.
A few retailers are trying to adapt to the new shopping culture by embracing entirely new business models. Apparel retailer Urban Outfitters, for instance, has launched Nuuly, a subscription service that on a monthly basis delivers a box to customers containing items of the company’s own brands, third-party labels and vintage “one-of-a-kind pieces”. The cost is $88 per month. Subscribers can wear the items they’re sent for as long as they like and when they’re ready to move on, send them back and swap them for new items.
Of course, while returns aren’t a problem for subscription services like this — the return of items is baked into the model — they don’t address all of the reasons for returns. If these services fail to deliver clothes subscribers like, or the clothes don’t consistently fit, it’s likely subscribers will cancel their subscriptions. And realistically, the entire market for apparel isn’t going to shift to the subscription model.
Ultimately, retailers do have to face the “new normal” of returns and that in most cases will mean being more accommodative to customers than is likely ideal from a financial standpoint. At the same time, instead of embracing returns as good for business in the long term, expect to see more retailers take an Asos-like approach under which they implement more thoughtful and nuanced returns policies, and take action against customers who abuse returns.
For more on how retailers can deal with returns culture, read our interview with Doddle CCO Mike Richmond, who explains why delivery should be at the heart of retail strategy, and why data is the key to combating serial returners.