Managing returns has always been a challenge for retailers due to the high costs and the lack of a single "right way" to stay profitable while meeting consumer expectations for free and unlimited return policies. The challenges are endless, and the environmental impact is a top concern for both merchants and consumers.
The rise in online shopping and the proliferation of digital shopping platforms like Amazon, Instagram, and TikTok Shop, along with many retailers shifting their businesses to e-commerce, has completely transformed the way people shop. This transformation has made returns even more common, as many shoppers order multiple sizes and colors online with the intention of returning those that don’t fit or don’t meet their preferences—a concept known as "bracketing." In fact, a new report by UPS Capital found that 42% of consumers use this tactic, being most common among Millennials (60%) and Gen Z (57%).
Merchants are stuck trying to balance profitability with consumer expectations; in the eCommerce landscape, customer experience remains paramount. For consumers, a smooth return process is crucial to building brand loyalty. The same report found that 58% of consumers say that a positive return experience would increase their likelihood of returning to that retailer.
The Challenges with Returns and Returns Logistics
The main challenge merchants face is sheer volume of returns they need to process, with over a third (39%) of merchants experiencing an annual returns rate exceeding 15%. Additionally, merchants struggle with the financial impact of returns: the same report found that 38% of merchants currently allocate over $100,000 annually for returns processing. Both of these challenges are direct results of the rise in eCommerce and the consumer demand for unlimited and free returns, which are costly for retailers.
Returns fraud is also on the rise, with a previous report finding nearly half of merchants suspect over 20% of their returns are fraudulent. These challenges – among others like returns fraud, cost of shipping, reselling returned items, and meeting consumer expectations – create even more pressure for merchants to develop the perfect returns process for their business.
The Environmental Impact of Returns
In addition to the financial and operational challenges, merchants and consumers alike are concerned about the environmental impact of returns, with 91% of merchants acknowledging the long-term impact eCommerce returns can have on the environment. Merchants are particularly worried about the inability to resell returned items, which results in significant waste.
To address this, merchants are seeking ways to enhance their sustainability efforts through technology and partnerships. For example, many retailers are partnering with companies that consolidate returns from multiple brands, which not only reduces shipping costs but also lessens the environmental impact. Other strategies include exploring product refurbishment, resale platforms, and enforcing stricter return policies. Ultimately, merchants need a multifaceted approach to returns that allows them to meet consumer demand while minimizing environmental harm.
Turning Returns into Opportunities
So, how can merchants navigate the challenges associated with returns logistics? They have the opportunity to turn returns into positive consumer interactions by implementing efficient and straightforward processes. By leveraging data-driven insights, innovative technology solutions, and strategic partnerships, retailers can enhance their returns processes and transform the customer experience.
For example, advanced and predictive analytics tools can help merchants better predict return rates and manage inventory more effectively. Technology solutions such as automated returns processing and advanced tracking systems can streamline operations and reduce costs for merchants and consumers. These technology solutions can also serve as a tool to detect fraudulent returns, a trend that is on the rise and causing financial loss for retailers. Strategic partnerships with logistics providers and other retailers can also improve efficiency and customer satisfaction through a consolidated returns process.
The future of returns will be full of collaboration and innovation between technology and merchants to create a straightforward and sustainable returns process. Sustainability will no longer be a top concern, but rather a non-negotiable when evaluating returns operations. It is critical for retailers to understand the returns landscape, analyze customer thoughts and expectations, and identify opportunities for improvement. By focusing on innovation and strategic planning, merchants can transform returns from a challenge into an opportunity for business growth, increased customer loyalty, and a positive experience for their shoppers.
