The 'Return Apocalypse' is Coming. How Do We Prepare?
Returns have reached epic proportions, and the consequences are stacking up.
Some call it wardrobing, while others call it bracketing. You know what I’m talking about — buying one item in every color and size, with the intent of returning everything that’s not quite right. This year, about 62 percent of U.S. shoppers admitted to the practice, up from 48 percent last year.
And that’s just the tip of the return iceberg. With shoppers buying more than ever online during the crisis, returns have reached epic proportions. Last year saw a 70 percent increase in returned packages. During holiday shopping season alone, $115 billion in merchandise was sent back.
And the consequences — for businesses, for shoppers and for the planet — are starting to stack up. As someone with a history in brick and mortar who now helps major retailers explore ecommerce, I know that cracking the return code isn’t easy. But, with shopping habits shifting permanently online, getting returns right has never been more urgent.
The real cost of returns
Free and easy returns have been a hallmark of online shopping almost since its inception, with giants like Amazon leading the way. It’s become so streamlined that many shoppers now look at returns as an insurance policy. In fact, online shoppers currently return anywhere from 15 to 40 percent of what they buy online, compared to just 5 to 10 percent of in-person purchases.
But convenience has a price. For retailers, there’s a financial hit that goes well beyond swallowing return shipping costs. If they’re lucky enough to restock an item, ecommerce companies can lose up to 20 percent of the value. If it’s out of season, used, or damaged, it might not be possible to restock at all. On average, returns cost businesses 10 percent of their total supply chain costs. For small and local businesses, this can represent an existential crisis, cutting into already thin margins and making competing against the big guys even harder.
But repercussions go beyond the profit margins. For all its convenience, the ecommerce revolution has come at an environmental cost. Just transporting returned inventory in the U.S. creates over 15 million metric tons of carbon dioxide emissions per year. Packaging adds up, too: In 2019, Amazon alone generated 465 million pounds of plastic packaging waste.
Often, those returned goods just end up thrown away. It’s common to find dumpsters behind warehouses and distribution centers filled with returned items, discarded in heaps after being rendered unusable.
How retailers can get ahead of returns
For retailers, the solution starts with preemptive steps to avoid returns altogether.
One of the biggest culprits — incomplete or inaccurate product descriptions — is surprisingly easy to fix. Providing photos and videos is critical: 93 percent of consumers consider visual content to be the key deciding factor in a purchasing decision. For apparel, featuring models of a variety of sizes brings merchandise out of the abstract. And it goes without saying that consistent sizing across lines and seasons can reduce guesswork and needless returns.
Better still: user-generated feedback and images. Nearly two-thirds of consumers say they are more likely to buy a product if they are able to view customer photos and videos first. Shots of products in action, without fancy studio lighting or photo treatments, bridge the gap between lived realities and consumer expectations. And while user reviews are vulnerable to manipulation, genuine input can be priceless.
Meanwhile, growing numbers of retailers are finding alternatives to the traditional returns process altogether. Larger companies like Walmart, Amazon and Target now encourage customers to simply keep unwanted items, even after receiving a refund. Other retailers redirect returned items to local charities, minimizing the ecological footprint while generating a taxable deduction for the brand.
Still, some retailers are discovering that loyal shoppers will forgo free and easy refunds under the right conditions. One study found 51 percent of holiday shoppers would be willing to keep items they’d otherwise return if they were offered a 30 percent discount on a future purchase. Some eco-conscious brands like Patagonia offer to repair damaged merchandise for consumers instead of replacing it altogether.
Changing our return habits for the better
According to the old retail adage, the customer is king. But when it comes to returns, this may be a teachable moment for consumers.
A 2020 Accenture study found 82 percent of shoppers have been making more sustainable purchases since the pandemic started. As more people look to become ethical consumers, there’s tremendous opportunity to educate shoppers that returns have a real impact. A public service campaign on the true cost of returns could go a long way toward shifting attitudes.
Some returns will be inevitable, but there are ways for shoppers to mitigate the economic and environmental impact. Among the many benefits of buying local is a radically condensed return journey. Big brands like Nordstrom are getting in on local love with brick and mortar hubs to help mitigate return pains. Meanwhile, local buy and sell groups can offer a way to unload unwanted merchandise without the unwanted side effects.
On a deeper level, it may be time to rethink our entitlement as online shoppers. Easy returns have created a culture of carefree, no-consequence shopping. However, there’s a simple reality to contend with: Free and easy returns remain practically ubiquitous in the online world. Competition is fierce and great retailers pride themselves on happy, repeat customers.
But there are better ways to generate lasting loyalty than generous return policies. Too often, return policies are a panacea for deeper failings — in sizing, quality, merchandising, or even in creating real relationships with customers. For retailers, focus on building trust with your shoppers. They’ll fall in love with your products and, best of all, they’ll know exactly what to expect. And for my fellow shoppers out there, let’s get intentional about what we buy and what we send back — we owe it to the stores we love, not to mention the planet.
Entrepreneur Leadership Network Contributor