How retailers are combatting e-commerce returns this holiday season
As e-commerce goes, so go returns. E-commerce is expected to hit $1.5 trillion by the end of the year, meaning this holiday season is also likely to see a record number of returned e-commerce items.
It’s not a cheap problem. According to a recent study by Shorr Packaging, e-commerce returns are expected to reach $19.4 billion this holiday season — more than 30 percent of the $64.7 billion in projected e-commerce sales. Earlier this year, an IHL report had estimated how preventable returns cost the global retail economy $642.6 billion each year.
“It’s a cost of doing business online; you do the best you can to make sure that everything — from the colors to the sizes — is portrayed accurately,” said Sucharita Mulpuru, retail analyst at Forrester. “I don’t think it’s a problem that’s easily solvable.”
Yet, many retailers have started coming up with ways to get their customers to make better shopping decisions online and, in turn, keep more of their purchases.
“Returns go up during holidays for a lot of discernible reasons — people are buying presents for others,” said Jason Goldberg, group vp of commerce strategy at Razorfish. “The fear of not being able to return something is a major impediment for consumers, so a lot of retailers have started making returns easier, even making it a core element in their marketing campaigns.”
According to the Shorr study, customers are likely to cut back on returns if retailers adequately address five key areas, including accurate product portrayal, fit, pick-and-pack, damages and return windows. With fit-related problems accounting for 17 percent of returns, several retailers have started making it a priority.
While most e-retailers include size charts, product descriptions and customer reviews, some like Asos have gone beyond and experimented with sizing apps. The fashion retailer has managed to reduce its fit-related returns by up to 50 percent, by using a virtual-fitting solution called Virtusize.
The tool allows customers to compare the specific measurements of an item they are considering to buy with an item they already own, displaying 2D silhouettes of both so they can more accurately compare sizes and choose the item that would fit them best.
Other retailers like Nordstrom have also been working with analytics startups such as True Fit, which uses data online to show customers how clothes and shoes will fit them in real life. The companies match the information provided by shoppers about their favorite clothing items with garment specifications and other data from retailers to generate sizing and fit recommendations.
Brands have also been concentrating on simplifying their returns processes, with 95 percent of shoppers saying that simple returns would be an incentive to shop at a retailer. More and more retailers have been embracing free return shipping too, since two out of three shoppers said they would purchase more via e-commerce if the returns were free. According to Shorr, companies that allow for free returns have seen between a 58 and 357 percent boost in sales.
A National Retail Federation study from October found that roughly 49 percent of retailers offer free return shipping now. While Amazon and Zappos led the way in letting customers off the hook for return shipping costs, smaller retailers, including fashion startup Tobi, have followed suit.
Some have even extended the duration of their return windows, which, according to Shorr, is a strong trust signal for consumers. Clothing retailer 3rd Power Outlet extended its return policy from a 14-day period to a 90-day period, which led to both a decrease in returns and a surge in sales. Nordstrom, too, has a 90-day window. Brands like Amazon also offer disappointed customers some tokens of appeasement, including gift cards or small discounts to persuade them to keep products they would otherwise return.
However, in a lot of cases, the returns process is one component of the shopping experience where stores still tend to maintain an edge over websites. At brick-and-mortar stores, for instance, return rates tend to average at a much lower 8.89 percent — with apparel being returned 9.96 percent and footwear 9.13 percent of the time.
“Customers have an opportunity to actually experience and assess the products in physical stores,” said Goldberg. “In that sense, the experience in a brick-and-mortar store is always going to have an advantage over e-commerce in terms of returns.”
Perhaps that is why retailers like Everlane are still aggressively trying to optimize the in-person experience with crafted physical experiences. The brand’s “Room Service” endeavor, for example, saw it visiting hotel suites in four different cities across the country to make customers try on and purchase its new shoe collection in person.
“There’s a great psychological kick that customers get when trying something on in person that makes it much harder for them to not buy it,” said Goldberg. “Also, when you return something online, it’s a mechanical process of just putting it in a box and shipping it, but when you return it in the store, there’s a high likelihood that you’ll be enticed by something else.”
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