The Ecommerce Boom and Challenges with Returns

Package Returns Surged by 70% Last Year

Returns have always caused challenges for retailers. With ecommerce booming, stores have new return-related problems to solve. In 2020 the number of ecommerce packages returned climbed by 70% compared to 2019 levels.

Analysts expect that some of the online shopping habits formed during the pandemic will be here to stay. In fact, a recent survey showed that 42% of consumers say they will shop online even more than they do now once the pandemic subsides. Because of these trends, ecommerce companies large and small are working on permanent solutions to the challenges they have faced with returns.

Trends Driving Customer Behavior

About 30% of all online purchases are returned, which is roughly three times the return rate for items purchased in brick-and-mortar stores. Ecommerce purchases are returned more for a variety of reasons.

Sometimes items ordered online do not fit properly, or do not meet customer expectations for other reasons. Also, online shoppers often order multiple sizes or colors of items so they can see them physically with the intent to return what they do not want. It also tends to be easier for customers to simply put an item back in the mail than it is to go to a physical store and wait at the return counter.

Creative Solutions

Though online returns offer convenience for shoppers, they are a significant weight on retailers’ balance sheets because of shipping and processing costs. On average, every $1 million reduction in returns adds $500,000 to a retailer’s profits.

Many large retailers like Amazon (AMZN) and Walmart (WMT) have employed the strategy of just telling customers to keep unwanted items. Meanwhile, Ulta Beauty (ULTA) offers virtual makeup try-ons. The feature was rolled out in 2016, but its popularity surged during the pandemic. Similarly, Levi Strauss & Co (LEVI) built an online tool which allows shoppers to see how jeans and other items look from various angles on different body types.

Outside analytics companies are also helping retailers with their return strategies. For example, Newline is a software company which has developed what is called a KeepScore. This number measures how likely a customer is to return products. For customers who are habitual returners, companies might choose not to offer them special discounted prices on certain products. Companies across industries will be working in the coming months to create positive return experiences for customers while not letting these return procedures drain their balance sheets.

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