Returns are one of the biggest headaches for Ecommerce businesses, wasting time, training resources, and playing havoc with sales forecasts. Statistics show that return rates for online purchases run 2-3 times higher than for in-shop buying. Why is this, and what can be done to help reduce your Ecommerce return rate? Let's look at why handling returns is so challenging for Ecommerce enterprises and explore some strategies you can adopt to tackle this issue head-on.
The high costs of returns: a quick look at Ecommerce return rate statistics
One major reason that returns hit Ecommerce businesses hard is the costs involved. From return shipping fees to handling and restocking, not to mention the time involved processing the return, liaising with the customer, and reshipping the order, returns rack up expenses quickly, especially at busy periods. Customer service time spent on returns also chips away at budgets, and perhaps the most significant cost comes from inventory write-offs when returned items can't be resold.
Industry statistics from Ecommerce businesses around the world paint a stark picture:
- The average return rate Ecommerce businesses see is 15%, according to Ecommerce return rate statistics from industry reports.
- During major sales periods, returns increase to 18%, costing Ecommerce companies £7m per year, according to KPMG.
- Processing a return can cost Ecommerce businesses as much as 66% of the original price of the item, according to Optoro research via CNBC.
As online sales boom and high street/shopping centre purchases continue to decline, these costs will likely rise. Returns could quickly swamp slim profit margins for independent and small retailers if not managed proactively.
E-commerce returns management can severely affect the operations of small retailers. Reverse logistics, for instance—the process of handling returns—is inherently inefficient, adding complexity compared to your regular shipping operations.
This is because returned items need to be individually inspected and sorted. Some also require disposal, individual discounting, or recycling, creating extra workload for you and your team. Handling returns can also impact other areas as staff juggle the extra tasks.
For mid-sized Ecommerce businesses handling thousands of orders daily, streamlining returns is a must, yet the unique requirements of returns make this problematic in many cases. Investing in the right systems and processes is key to smoothing the reverse logistics cycle.
The critical customer experience
Though operationally challenging, efficient returns management is critical for customer satisfaction. A poor returns experience will usually deter the customer from purchasing from you again, and they may also leave you critical feedback. Many online shoppers check returns policies before buying, with restrictive or complicated policies often deterring sales.
Once purchased, a difficult or slow returns process causes frustration for the customer, who is out of pocket without the item they purchased. Conversely, an easy and efficient returns process may not only repair the reputational damage from a disappointing purchase (whether the culpability for this lies with you or the customer), but actively encourages future purchases and good reviews by reinforcing your reputation for attentive customer service.
Balancing operational costs against customer experience is therefore essential, and achieving this comes down to reducing reasons for returns proactively.
Strategies to reduce returns
No business can eliminate returns completely. However, various strategies can help optimise policies and minimise reasons for returns.
- Improving product descriptions and images helps align customer expectations with the actual product. This reduces returns from items simply not being what the customer expected.
- Virtual CGI try-on tools are growing in popularity, especially for apparel. These give customers confidence in fit and sizing prior to purchase.
- Predictive analytics help match customers to products based on data like past purchases, browsing history, and demographics. Again, this facilitates more informed purchases upfront.
- High-quality, protective packaging prevents returns from items damaged in transit. It also enhances the unboxing experience, making a return less likely.
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