Why online retail’s higher rate of returns is a good thing

Internet Retailing

16th Aug 2018

While the ease and convenience of online shopping is what attracts so many consumers to e-commerce, it is also a factor in the increased rate of returns, which can range from 15 per cent to as high as 30 per cent.

When consumers purchase online, their house acts as a temporary change room, where they finally are able to see and feel the product and affirm their decision to keep the goods.

And when it’s as simple as repackaging the product and attaching the return label, consumers can still have all of the choice of an in-store experience, without the commitment.

But returns do have an impact on retailers. Cost is an obvious example. For retailers that don’t have a well-thought out reverse logistics process in place, the cost of returns can very quickly climb, putting the retailer out of pocket and reducing profit from sales.

But the impact of returns is much more than costs accrued. Returns are an important component of a consumer’s purchasing experience. One research study found that although lenient returns policies do correlate with higher return rates, it also correlates with an increase in purchases made.

This means that enhancing your returns process not only influences customer satisfaction but is a key business decision that can mean greater sales.

As e-commerce in Australia continues to grow, following a record year of online shopping in 2017 with spending reaching $21.3 billion on physical goods, returns will need to become a core part of retailer’s businesses.

It’s important that retailers have a plan for reverse logistics, to ensure the process is seamless and efficient. After all, returns are a post-sale touchpoint with the consumer and should be treated as equally as important to those prior to the sale.

Consumers will view a retailer more positively if they have an experience that is easy, hassle-free and timely. As more retailers’ place importance on returns, we are seeing innovations that will change the process entirely.

Providing multiple options for consumers to return a product is one way. For example, some retailers have arrangements with local shopfronts like pharmacies and supermarkets that allow customers to drop off packages to be returned to the retailer.

Couriers that go direct to the customer’s front door to pick up a return also alleviates the hassle of returning a product.

Try-before-you-buy methods are likely to become popular in the future. Oscar Wylee, an eyewear retailer, is one brand that’s doing so by offering a free home try-on service. Consumers can order five frames to be delivered to their door for free. After a trial period of five days, consumers can then return the frames, for free, and if they have found a frame they like, are sent a brand-new product.

Clothing and apparel retailers are also investing in fit technology to better indicate fitting and size options based on personalised measurements of the shopper. This aims to limit the need to return products that are not the right fit.

At the end of the day, returns are a key part of a consumer’s purchasing experience that can be beneficial for online retailers. A good returns system can make a customer more willing to make purchases with a retailer in the first instance, and a positive experience with a return can lead to repeat purchases. That’s why it’s important to think of reverse logistics as a key business decision, not a hassle.

Kim Garner is managing director of international operations at FedEx Express Australia and New Zealand.