Not too long ago, I ordered a really cool-looking pair of boots on Amazon. These were reasonably priced, and the reviews were mostly positive. What I received looked like a toddler designed and 3D-printed these boots, and I immediately returned them to the seller. Most people love the convenience of online shopping and being able to order almost anything without having to leave the couch. However, not being able to physically see and touch the product can cause issues and disappointments. As a result, consumers returned products worth $743 billion in 2023, with an estimated average return rate of 15% to 20%.
While returning items can be a hassle for customers, it is also expensive and time-consuming for companies. Let’s see the main reasons customers return items, the consequences for businesses, and what can be done to reduce item return rates.
Why do people return their products?
There are a few reasons why people return the items they purchase; here are the most common.
Not what they were expecting
If you have ever ordered something online, you know how deceitful product images can be. I talked about a recent experience with the boots in the introduction, but these stories happen to people every day. Sometimes, weird lighting will make the product appear a different color or larger/smaller than expected. Buying clothes or shoes can be difficult, and size charts can be off. With more companies using better pictures and videos, things are improving, but it is still a common issue.
Damage during shipping
Having products delivered directly to your home means there will always be a risk of the product getting damaged during shipping. Sometimes the packing materials are insufficient, or the carrier isn’t careful enough with the packages. This can be upsetting and will most likely cause the customer to return it.
The customer has found a better deal
Once in a while, people will order something, only to realize a similar item is offered elsewhere at a lower price. If it is too late to cancel the order, they may return it and order the less expensive product instead.
The customer received the wrong item
Fulfillment errors can happen and will cause the customer to receive the wrong item, size, color, or quantity. In that case, it is reasonable that the customer returns the item and asks for a refund or replacement.
Regret
According to a recent survey, 17% of Americans made a purchase while drunk in 2022. No wonder some of them regret their purchase and return the item. Impulse buying is a thing in stores and online, where we are bombarded with ads on products and services to buy. It isn’t rare to regret a purchase, and people often return them if they do.
Bracketing
An impressive 58% of U.S based customers say they sometimes make purchases with the intent to return the items later. Sometimes customers will order something to use briefly before returning it or pretend it never arrived. Fraud isn’t the main reason people return their purchases, but it happens frequently. Other times, they will order multiple items, decide which one they like the best, and return the rest. This is especially true in the fashion industry, where customers will order various sizes to see which one fits the best. Some companies even encourage this tactic to build customer loyalty.
Consequences of a high return rate
While convenient and necessary for the customers, a high return rate can put a strain on a business in the long run.
Just like it requires money and resources to ship products, it takes a lot of effort to process returns. Whether working with a 3PL partner or processing the returns in-house, the higher the return rate, the higher these expenses will be.
Returns need to be processed, products have to be restocked, and labor isn’t free. In addition, many businesses offer free, or at least discounted, returns. Someone has to pay for transportation, and that is an extra cost for the company. Unfortunately for entrepreneurs, a recent survey from Invesp has shown that 79% of consumers expect free return shipping, and 74% also stated they would not order from an online store that charged for returns.
In the best-case scenario, the returned product can still be resold by the company. In that case, it takes time and money to repackage it and return it to the shelves. However, in some more unfortunate cases, the product is damaged and is considered a loss for the company.
Finally, even though some customers are purchasing with the intention of returning the item, many other customers return their items because they are disappointed or frustrated. The return process is rarely enjoyable for them, and a higher return rate leads to customer dissatisfaction.
What can businesses do to deal with returns?
Fortunately, there are a few things online businesses can do to deal with returns and reduce their item return rate. Doing so will increase customer satisfaction and retention rate while saving time and money for the company.
Provide non-misleading, high-quality visuals
We all know how frustrating it can be to receive an item that isn’t what we expected—and good product photographs can almost make a Honda look like a Ferrari! While product pictures and videos should highlight the product and make it look good, they should also give an accurate representation of what the customer will receive. Colors should not be altered too much, and the product should not look larger or smaller than it really is. Pictures should be high quality and zoomable, if possible. Finally, videos are beneficial for seeing the product from multiple angles and how it works.
Offer accurate size charts
Shopping for clothes online isn’t always easy, especially when trying a new brand for the first time. That is why companies should strive to offer the best and most accurate size charts. Fortunately, there are many advanced tools available these days. Some will take into account customer preferences, body shape, height, and age and recommend the best size for them.
Offering customers virtual try-ons
Maybe you’ve heard of virtual mirrors in stores that allow customers to try clothes without physically wearing the product. This technology is slowly becoming available to online retailers and will, in the future, enable customers to use their phones to visualize how they’d look wearing the clothes on a merchant’s website. While not a solution for every business, it can definitely help reduce the return rate and incentivize customers not to buy several sizes of the same item so they can return all but one.
Ensure products are packaged and shipped securely
As explained above, products can get damaged during shipping. That is why fragile items should be packed securely, and boxes should be the same size. Sure, packing materials are an additional expense, but so is processing returns for damaged items.
Encourage user-generated content
Product reviews are everywhere these days, from apps to online stores, restaurants, companies, etc. They are a great way to get customers to trust your website, even though reviews can be fake. Websites like Amazon even let customers upload pictures of the products they buy, highlighting product flaws. Still, user-generated content can be a good addition to the product page content. Likewise, testimonials on social media can be a great way to display your product in another light.
Have a clear return policy and an easy process
Returns can’t be totally eliminated, so it is important to make them as easy and painless as possible. The return policy should be clear and not hidden on the website. Having an easy process and a clear policy will not only increase customer satisfaction and reduce frustration (92% of shoppers say they would shop again if a company has an easy return process, but only 22% of them state that returns processes are easy), it will also reduce the cost and time involved with customer support.
According to the above Pitney Bowes survey, the top five reasons why a return process is difficult are:
1. Return label not included in the shipping box (22%).
2. Return shipping isn’t free (20%).
3. Refunds take too long to be issued (19%).
4. Lack of communication from e-tailer on return status (16%).
5. Time and effort of dropping off returns with a mail carrier (13%).
Automated parcel lockers are making receiving and returning ordered items easier for customers, allowing them to return items 24/7.
Take protective measures against fraud
Return fraud costs companies billions of dollars a year and can hurt the bottom line. A small fraction of customers will attempt fraud, which can be challenging to fight. Sellers can track customers and flag suspicious activity. A high return rate coming from a single customer or location, for example, should be investigated. There is now software that uses AI and machine learning that companies use to fight return fraud.
Should you offer free returns?
On one hand, offering free returns drastically improves customer satisfaction and conversion rates. A study from Invesp shows that 27% of customers would be willing to spend more than $1000 on a single purchase if the store offered free returns, but only 10% would if the store charged for returns.
On the other hand, returns are costly for companies. About half of online retailers charge a return fee, often only part of the actual shipping cost. This helps offset transportation and restocking expenses, as well as cover the costs of customer-damaged items and packaging. Another reason companies charge for returns is environmental concerns to reduce the impact on the environment.
Marketplaces like Amazon are, for example, often passing part of the return cost onto their third-party sellers while also offering an easy and quick return process. This helps with customer retention but is a source of complaints from many third-party sellers.
Ultimately, there is no right or wrong move here as it depends on the business model and the industry. There are pros and cons to both solutions, and I can see why a business would start charging for returns, despite the impact on the customer.
Conclusion
Returns management is an essential part of online retail and has a significant impact on both customer satisfaction and the company’s bottom line. Fortunately, there are many things entrepreneurs can do to decrease the return rate and reduce their costs while keeping the customer happy. The big question is, should sellers charge for shipping? Customer expectations keep increasing while company costs continue to increase. It will be interesting to see the trend on this question in the future.
