Retail Returns Require a Massive Rethink – Are You Ready?

When I started to think about the session content I wanted to deliver at Aptos Engage 2022, our annual client conference, inspiration came to me close to home. 

Our household was in the throes of navigating prom season, and along with that came dresses. Lots and lots of dresses. All delivered to our home, with the number of dresses arriving on our doorstep eventually reaching 10. 

While I try to make sustainable choices whenever possible, I had to face the facts – there was nothing “green” about having 10 dresses delivered to our house, with eight of those then being shipped to retailers’ warehouses designated for their online returns, one returned to a store and, miracle of miracles, one worn to the big dance. 

(And let’s not even talk about what we went through with shoes, because then you are really apt to judge. But if you are a parent who has ever gone through a prom season, I also bet you can relate.) 

To make matters worse, by the time we got around to returning most of the dresses, prom season had already passed.

Where were those dresses ending up? In the back of the store in a clearance rack? Selling for below cost? And how were those dresses going to get back to a store from the returns processing warehouse? 

CO2 to get the product to me + CO2 to get it back to the warehouse + CO2 to get it back to the selling store, all times eight dresses. 

Earth erosion and value erosion times eight. 

Mitigating the massive returns impact 

Online return rates have always been an issue. That’s nothing new. But as the pandemic spurred an explosive shift to digital, a byproduct of that shift has been a parallel growth in returns. The rise of digital and omnichannel sales volumes only has made the returns challenge even greater for retailers. 

According to a report by the NRF, the 2021 total rate of returns (16.6 percent) is up from 10.6 percent during 2020. That adds up to a whopping $761 billion in merchandise sold last year only to be returned by consumers. When NRF looked specifically at online sales, the organization found that online sales accounted for $1.05 trillion of total U.S. retail sales last year, with approximately $218 billion of online purchases being returned. 

An informal survey Aptos conducted with its clients during Engage yielded similar findings, with retailers indicating their return rates were also in that 20-30 percent range.

To state the obvious, returns rates that high have tremendously negative impacts in terms of profitability, margins, sustainability efforts, increased labor costs, etc.

So we asked our customers this question – what were they doing to mitigate the impact? 

Many retailers we asked said they charged for non-in-store returns. This should have surprised me more, except Zara had recently made the much-talked-about announcement about its decision to charge shoppers who return items bought online.

Zara, like most of our customers we talked to, waives any return fees if the items purchased online are returned to stores. 

With returns to stores being highly encouraged – and also generally considered better for the environment due to fewer emissions during transport – retailers then have the opportunity to train and incentivize store colleagues to convert returns into a new sale. 

With one report finding the cost of returning a $50 product is roughly $33 because of the costs of processing and transportation, losses from liquidation, and product discounting expenses, having retailers invest in converting returns into something more profitable makes a lot of sense. 

Determine the right return policy for your business – and your customers 

E-commerce is here to stay. Understanding that every online purchase is twice as likely as an in-store purchase to be returned is something that retailers need to be thinking about. It’s a tricky balance to implement a return policy that stops the bleeding but is still able to preserve the brand and loyal customer relationships.

Amazon’s return policy of refunding for some items but allowing the customer to keep the product is not viable for most retailers. 

Since returns are a reality of being a retailer, it’s on you, the retailer, to convert this into an opportunity. 

Returns allow retailers to engage with the customer again. What will you do with that opportunity? The more painless and pleasant that experience is, the higher the likelihood that the customer will shop with you again. And who knows? Maybe when the customer makes a return at your store, your associates can turn that return into an even better sale.