The COVID-19 pandemic has reshaped consumer behaviour significantly, particularly within the retail sector, where e-commerce returns are continuing to exert a substantial impact on profit margins. As in-person shopping regains its prominence, retailers are finding themselves besieged by a dual challenge: managing the surge of returns from both online and physical sales, especially during the holiday season. Many retailers are reportedly revising their return policies in response, primarily to combat the financial strain attributed to fraudulent returns and exchanges. Some businesses are reportedly considering prohibiting returns entirely for certain products.
Holiday shopping periods, particularly around Black Friday and Cyber Monday, trigger a notable increase in returns. Retailers often face situations where the cost associated with processing these returns outweighs the value of the items being returned, posing significant threats to profitability. According to the National Retail Federation, return scams resulted in an estimated loss of over $100 billion in 2023. The financial implications of processing returns are accentuated by the fact that returning purchased products increases the price point per item sold. With online purchases, up to 30% of products bought online are returned, contributing to environmental concerns with an estimated 24 million metric tons of CO2 emissions generated annually from such returns.
Retailers are grappling with logistical challenges posed by unmanaged returns, which can lead to damaging costs incurred during the transportation and storage of returned goods. Items such as clothing, electronics, and other plastic products often encounter damage or logistical hurdles after being returned. To counteract these challenges, many retailers are partnering with return management and reverse logistics service providers, enabling refurbished items to be resold on secondary marketplaces and thus minimising waste.
The dynamics of return policy abuse have also emerged as a significant concern for many retailers. Savvy consumers are drawn to lenient return policies, which often become targets for exploitation. Common tactics include “wardrobing,” where used items are returned, and manipulative strategies such as using counterfeit receipts for stolen merchandise or swapping high-value products with cheap imitations. A survey conducted by Secure Authentication Brands LLC in 2020 indicated that 37% of respondents admitted to engaging in wardrobing, highlighting the prevalence of this practice. Furthermore, a trend among social media influencers has arisen, termed “snap-and-send-back,” where products are purchased for immediate promotional use before being returned for a complete refund.
In response to these fraudulent activities, retailers are adapting by introducing updated return policies with new clauses, implementing processing fees for returns, and, in certain cases, outright banning frequent returners. As consumers prepare to navigate the holiday season, understanding individual store return policies will be crucial to avoid unexpected outcomes.
With the evolving landscape, retailers are encouraged to develop effective return management strategies that leverage technology for improved operational efficiency. Analysing customer data enables retailers to identify trending items and associated return patterns. Utilising order management platforms to track receipts and inventory can enhance managerial oversight. Additionally, the incorporation of tamper-evident return tags guards against manipulation while upholding a measure of accountability in the return process.
The retail industry stands at a critical juncture where mastering the intricate return process has the potential to yield substantial benefits this holiday season. Converting typical refunds into exchanges, store credits, or partial refunds may bolster customer loyalty while maintaining effective inventory control. By leveraging insights into customer behaviour and preferences, retailers can create strategies that not only minimise financial setbacks but also enhance the overall shopping experience.
Georgia Leybourne, Chief Marketing Officer at Linnworks, emphasised the importance of a fluid consumer journey in her role, which encompasses 15 years of experience in supply chain and logistics. Leybourne’s extensive background in digital commerce underlines the need for improved retail strategies, reinforcing the notion that understanding customer motivations for returns is vital in cultivating business profitability.
Source: Noah Wire Services