E-Commerce Returns Are Very Broken


Logistics innovations

Online retail is booming. More and more people are shopping online for convenience and the wide selection available. However, one area where online retail falls short is in the returns process. The eCommerce returns process is broken, and it’s time for retailers to start paying attention. Today we explore why eCommerce returns are terrible for customers and retailers alike.

The History of Returns

Returns have been a part of the retail landscape for as long as brick-and-mortar stores have existed. In the early days, returns were not a big issue because the selection was limited, and more notably, people could not buy from the comfort of their homes online. But the advent of the internet, online shopping has changed everything (thanks Jeff Bezos!).

Now, people can order anything they want while still in their pajamas. This convenience comes with a cost, however. The ease of online shopping has led to a massive increase in returns. Multiple studies agree that return rates for online retailers are as high as 30%. In contrast, the return rates for brick-and-mortar stores are only about eight or nine percent.

To frame the numbers another way, products purchased online are 3x more likely to be returned. Although the pandemic fueled online shopping and subsequently higher numbers of returns, the trend is not expected to change anytime soon. Time will tell, but it is predicted that the returns problem for retailers will only worsen, with returns expected to cost retailers $550B a year by 2025.

What Are The Most Commonly Returned Items?

Clothing and shoes top the list, followed by electronics and home goods. It makes sense that clothing and shoes would be at the top of the list, as they are often bought sight unseen, and it can be challenging to judge the fit or style without trying them on first.

Electronics are also frequently bought online and can be tricky to figure out if they are compatible with other devices or software without actually using them. And finally, home goods can be difficult to get a sense of without seeing them in person first.

Why the eCommerce Returns Process is Terrible for Customers?

#1 It’s Time-Consuming

In exchange for the convenience online shopping provides, customers first must wait for their items to be delivered to try them on/set them up. Then, should an item need returning, the consumer must repackage the article, print and affix a return label, and then drop off the item at the local post office or courier center. All of this takes time and effort for the customer.

#2 It’s Expensive

Customers have to pay for shipping, both when they order the item and when they return it. Paying for shipping happens even if “free shipping” is included, as retailers bury the cost into their pricing. The cost of goods is collectively driven up when a retailer experiences increased returns from their customers. Even if a retailer reimburses customers for return shipping, they often have to wait weeks to get their money back.

#3 It’s Confusing

The return process is often different for every store. Customers must figure out how to obtain and print return labels, complete necessary paperwork, and then learn where to send their items. The entire experience can be very frustrating, especially if they are already unhappy with the product they received. In addition, a poor returns experience can easily crush customers’ loyalty to a particular brand.

Why the Ecommerce Returns Process Is Terrible For the Retailer?

#1 It’s Costly

The cost of processing returns can add up quickly. This is certainly true if a retailer deals with a high volume of returns. Shipping costs, sorting, restocking, and the cost of lost or damaged items all eat into a retailer’s bottom line.

It’s estimated that processing a return costs retailers about twice as much as fulfilling an order in the first place. Some estimates put the cost of processing a return on a $50 item exceeding $30. The returns situation has become such an economic burden that some retailers tell customers to keep items and refund their money.

#2 It’s Time-Consuming

Returns take a long time to process, adding additional costs beyond just the fees associated with return postage. Once a return has reached a retailer’s distribution center or store, the first step is determining if the item can be resold as new, sold to a third-party reseller, or must be destroyed. This process cannot be automated and requires humans to examine every return.

Regardless of the final destination for a return, processing costs continue. Items in new condition will need to be shipped to a store for restocking. If the item is destined for a third-party reseller, only a fraction of the item’s value will be recouped. Lastly, if a return is to find its home in a landfill (or recycled), the total expense for the retailer is exponentially more significant than the product’s original cost.

Smart Lockers as Return Solutions

There are many ways retailers can work to reduce the frequency of returns. Augmented reality and better product descriptions are just two ways companies try to curb the number of returns. For as advanced as online shopping becomes, however, returns will also be a thorn in the side of retailers.

Photo of a courier walking with a package

Smart Locker Rendering in Public Location

A holistic returns network with Smart Lockers is one technological advancement that will reduce the cost of the returns process. Smart Lockers are self-service kiosks allowing customers to drop off their returns without waiting in line or interacting with a customer service representative. More impressively, the returns network of the very near future won’t require customers to repackage their purchases or print and place a return label.

After requesting a return online, customers will be given an option to drop off their purchase in a nearby Smart Locker. Then, using a code sent to their smartphone via email and SMS, all the customer has to do is scan the code and deposit the return in a slot that automatically opens. That’s it for the customer!

The deposited return sets off a series of optimized processes for the retailer. First, local couriers will collect returns from each Smart Locker and bring them to a centralized collection point. Next, product specialists will determine whether the item can be restocked, sold to a reseller, or must be destroyed. Items the retailer may resell will then be aggregated and shipped to the retailer in bulk. The same holds for products to be liquidated to a reseller..

By eliminating the need to purchase return postage, utilizing product return specialists, and aggregating return shipments in bulk, the Smart Locker network can reduce return processing costs by more than 50% for retailers.

Overall, the Smart Locker network is a win-win for customers and retailers. They provide more efficient and convenient consumer returns while reducing retailer costs. To learn more about how your organization can maximize smart lockers to reduce cost, increase revenue, and delight your customers, contact the ParcelPort team online by visiting www.theParcelPort.com, email at sales@theParcelPort.com or calling 1-800-818-0870.