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November 2, 2023
Are Stores Set Up To Handle a Wave of Online Returns?
With many retailers no longer offering free online returns, in-store returns promise to see an uptick. Are stores ready?
A study led by researchers at the University of Portsmouth supported by the ECR Community Shrinkage and On-Shelf Availability Group concluded that “returns from online sales, particularly returns to store, are seriously impacting company profits.”
The study finds that BORIS (buy online, return in-store) “creates unexpected additional costs,” including requiring stores to find more physical space to store returns in their shops and use store staff to process returns.
The study concludes that retailers should treat returns as a profit center instead of a cost of doing business, but complex procedures for managing returns remain a hurdle. The researchers wrote, “With little senior management oversight of the returns process, retailers find it difficult to pin down crucial information such as the rate of return and the costs of handling a returned item.”
Other studies also show a side benefit of having shoppers return or pick up products from stores is a high likelihood that they’ll make an additional purchase. However, Appriss Retail’s “2022 State of the Industry: Returns as an Engagement Strategy” found only 22% of retailers believe they are effective at incentivizing shoppers at the point of return.
As far as the in-store return experience goes, a Slickdeals survey last year of 2,000 U.S. adults found 43% agreeing that returning things in person is worse than doing so online. The most hated parts of in-person returns were found to be having the person in front of them escalate the situation (39%), getting managers involved in their returns (32%), and having to travel to the store (32%).
Nonetheless, a survey from Happy Returns, which partners with retailers to support in-store returns without the need for boxes or labels, found consumers increasingly seeking to drop off online returns at stores as more retailers are charging for shipping. The survey of 2,000 U.S. consumers fielded in August found that 67% rank in-person returns as their top preferred return option, up 26% from last year.
Narvar’s 2023 State of Returns survey likewise found the most preferred return method for online shoppers for the second year in a row was “drop-off at a third-party location,” including stores but also the post office, UPS, or a locker. The top reason was to avoid the cost of mailing the return, while a third of respondents cited “repackaging” as their top frustration. Getting an “instant refund” also held strong appeal.
A Shopify blog entry on BORIS counted several benefits for retailers, including saving the cost and time of mailed returns, increased foot traffic, and adding customer convenience. Downsides cited included potential long return lines and staff demands. Kate Ashley, associate teaching professor in the Supply Chain and Information Management Group at Northeastern University, told Shopify, “A retailer that offers BORIS needs to have a clear process for handling merchandise that is returned to a store, especially if the assortment offered online differs from brick-and-mortar offerings.”
Discussion Questions
What challenges may an increasing frequency of in-store returns present to the in-store shopping experience and retail staff? Do you agree that the BORIS (buy online, return in-store) process likely creates profitability challenges for retailers?
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The added workload on front-line staff to process these drop-offs can be a challenge for some retailers. Many retailers are reluctant to add labor hours or staff to help support the additional work related to these returns, so this puts additional stress on the frontline team. This can be further exacerbated if the retailer doesn’t have adequate space or clear processes for handling the returns. When the BORIS process is handled inefficiently, it takes more time and effort on the part of the frontline team, and so when they are processing BORIS orders and not serving the customers in the store who are there to shop, conversion rates and sales can suffer which can impact profitability.
Returns are a hassle both for the retailer and the customer, so anything we can do to make this frictionless is a real win. Now, from the retailer’s perspective, returns are expensive—especially when seen as just “returns” and not “returning SKUs.”
Online returns are especially challenging given their velocity that still hovers around 30%. Technology can help by leveraging AI and User Generated Content (UGC) to reduce the number of returns by sizing correctly, while RFID, with its serialized inventory capabilities, can enable drop-and-go returns.
Retailers need to move their returns strategy to the C-level for some serious discussions. In stores, one of the most telling KPIs is sales per square foot. Why carve out precious real estate for a line of disgruntled customers making returns? Returns are fraught with emotion, but they are a reality. So we need to eliminate the friction for customers and replace it with surprise and delight. Lifetime customer value!
Now back to seeing returns as just “returns” and not “returning SKUs.” Maybe retailers should want some SKUs to be returned in-store and others to be returned via third-party shippers. Every CEO, CMO, CFO, and COO with significant returns need to schedule a meeting together right now. The topic: How to maximize profitability despite (and driven by) returns.
Great points Ken! And as more retailers are charging for shipping of returns, we are likely to see an uptick in in-store returns this holiday season. This will be a problem for retailers that don’t prepare for it from a space and staffing perspective. Employees will be stressed and customers will be frustrated. It is not too late to prepare space and staff for the expected surge in in-store returns.
The entire workflow of reverse logistics needs to be evaluated and treated as not only an operational function but as a customer experience. The cost of returns is becoming an overwhelming dilution on margins, hence profitability. The more ecommerce drive purchase and penetration within the multi-channel matrix, the more retailers will need to address this area. Perhaps we should look at automation similar to self check-out to reduce manpower or regionally designated locations who can better consolidate staffing.
Kohl’s has reported that Amazon returns have bolstered their business due to impulse purchases and the ubiquitous 15% off coupon that now accompanies your return. Perhaps it’s an opportunity vs. a nuisance?
I would push back on that conclusion and question whether it considers the full range of costs and benefits. For example, a return to store might annoy consumers when it has to be escalated to a manager, but if the escalation is “hey, this is past the return date” or “this item has been damaged” or something like that, the store serves a purpose in rejecting invalid returns before the retailer has to pay for shipping. How many returns to warehouse are unsellable vs. returns to a store?
This is an unhappy path process that no one wants to have or do, so it has undoubtedly suffered from neglect. Any money that retailers may be losing in a returns process, I would first look to poor process and tech support before I started making any claims about how costly it is.
Absolutely. I totally don’t accept the premise or conclusions of the survey.
In-store returns demand more staff and space to minimize frustration among customers and employees.
Especially over the next three months, stores will need to allocate more store associates to process returns. Retailers need to know if they need a dedicated returns area or more physical storage space (and how to achieve it).
BORIS can protect margins to a degree due to cost savings. A smooth returns experience in an opportunity to delight customers and earn their loyalty.
Wait a minute. The article is saying that BORIS returns are more expensive than a non-store return? I don’t belive that for a nanosecond. How’s this for a solution? Smarter selling by retailers and smarter buying by customers. Removing “free” from the return conversation immediately gives pause to some purchases. Good. It also then eliminates some level of bracketing and the subsequent returns. Many retailers can do a better job at registering color and pattern and texture. Some websites offer terrific magnifying views. Others off 1″ by 1″ photos. Ridiculous. Fit? Oy…
Retailers, and Amazon, created this monster. Smarter selling will encourage more responsible buying. And retailers that can’t figure out how to handle BORIS returns will be happily replaced by the retailers who do figure it out.
Everything you do is part of who you are, an extension of your brand. Returns are no different and the brand and retailers that understand that are the most successful at it. How many of us are loyal to retailers who have phenomenal customer service and how many of us include “returns” in our definition of “phenomenal customer service?” Any activity that doesn’t generate revenue could be seen as a challenge to profitability but done well, it can be a positive addition to lifetime value. I also think the assumption is that online return rates will remain two or three times higher than brick & mortar. Though I believe online return rates will remain higher, it will be interesting to see what happens once convenience and cost, two of the variables partially responsible for higher online return rates, are altered.
The loss from returns dwarfs losses from organized retail crime. Retailers must examine the reasons why returns happen and address the problem at the source.
It’s really not fixable, Cathy. It has been this way since the catalog days.
No offense, but that study showing that consumers will prefer returning in stores is sort of ridiculous (and skewed, I suspect).
First of all, shipping charges for boxed returns can be offset by creating a workflow in distribution centers that is far more efficient than asking in-store personnel to do it. If something is brought online, the return should be made easy as pie. This is one thing Amazon does well, but it has no stores, anyway so it opted for customer convenience.
One report seems to presume that between either charging for shipped returns and forcing consumers to return product to stores the volume of returns will decrease because customers don’t like doing that but sales will remain the same. Way to improve the customer experience, guys. It’s unclear to me how the question was worded that caused consumers to say they want to return products to stores. I suspect it’s over less desirable choices.
Then there’s the lost product because store personnel will not be happy spending time processing them correctly, and of course, not all stores carry all products. So what are the stores supposed to do with them?
The best of all worlds would be to encourage consumers to BUY in stores, not create punitive measures for all involved. BORIS is not good. However, returns are simply part of the cost of doing business via eCommerce.I know I say this all the time.
DTC returns have been a challenge forever. Fitting rooms, and actually touching product is the only way to reduce them. All the other schemes are just that. Schemes. Please don’t be penny-wise and pound-foolish.
The key is to develop a systematic, convenient return process & not simply task current store employees with additional, unorganized responsibilities. Lessons can be learned from Amazon. Returns without packaging or labels at Staples, with a 10% off a Staples purchase is a win-win for Amazon, Staples & most importantly, the customer.
Returns need to be easy and frictionless. There are plenty of retailers that do that. So for the retailers who want to make it difficult, beware of the competition who makes it easy for customers. That doesn’t mean you don’t protect yourself. Just be very thoughtful about how you do it.
It’s time for retailers to optimize the return process. Make it easy for customers by giving them clear parameters, multiple drop-off options, quick refunds and hassle-free service. Offer exchange, up- and cross-sell offers, and treasure-hunt sections featuring one-of-a-kind returned items for online and in-store returns to maintain margins. Develop and improve internal system, processes, employee enablement and post-purchase communications.
This is going to kill in store staff…and I do not see how retailers would be able to forecast how and when to add staff to handle the potential deluge of in store returns. Further, in many stores, the process of handling the return from a systems standpoint is not easy, and with the additional specter of fraudulent returns hanging over the existing process, well, I forecast nothing but tragedy here…
Of course encouraging in-store returns of online purchases can lead to a sub-optimal shopper experience and added pressure on store associates. Most retailers don’t have a well-defined methodology for flowing returned items back to inventory.
There are opportunities to do some engineering here, I think:
Self-service return stations: Scan the item’s tag and the payment card used for the original purchase and drop the item into a mail-box-like hopper. Get a receipt – paper or SMS. I like the idea of on-the-spot “today-only” incentives on the receipt to encourage shoppers to stay and browse the store.
Deploy hand scanners to periodically scan, confirm and record returned items during the day. Items that can be returned to the sales floor should be promptly “reverse-shopped”. Remaining items should flow upstream to the nearest DC or reverse logistics partner.
“creates unexpected additional costs,” Unexpected ?? That what should be obvious is so described seems ominous. I would say companies need good modeling of full-costing, rather than just offering “free everything” and brushing off concerns “that’s what we need to remain competitive”; they also need to work on reducing returns altogether (‘cuz there’s no cost at all if they don’t happen in the first place.) Actually doing this, is, of course the easy part 🙂
Every in-store return is an opportunity to leave an impression on the customer, which is why running too tight on labor leads to rolling the dice. Good retailers develop streamlined return processes, timed for steps to record info, mark products, give back credit/refunds efficiently and without hassle. Creating time savings and targets means store teams can spend more time on taking care of the customer, and other tasks. Even with a rush of several customers at once, benchmarked transactions keeps things moving, so customers can move along. Retailers must create and stick to good processes to achieve optimal labor savings and customer happiness.
The only thing more frustrating than waiting in line to buy something is waiting in line while the person ahead of you is trying to return something and the store employee is trying desperately to remember the returns training.
This holiday season will bring more clarity to the feasibility of BORIS. Much of the seasonal in-store help may not find their stride with processing returns for several weeks, resulting in diminished customer experience, and to the end, diminished likelihood of additional purchase on the return trip.
While there are front end cost savings on BORIS, there are also downstream costs for managing instore returns for items not actually sold instore. That inventory still has to be relocated (eg. more cost).
At this time, no retailer has found the silver bullet on returns. The holiday season will always shine a light on areas for continued improvement.
I agree that accepting in-store returns can affect in-store shopping, as the involvement of store staff to handle both activities simultaneously could lead to mismanagement. This may lead to longer lines and wait times, which can frustrate the in-store shoppers. Consequently, retailers would require a dedicated staff or need to train the existing ones to handle returns efficiently, while also attending to in-store customers but this may strain their available resources. Therefore, regarding BORIS profitability, challenges do exist for retailers because processing in-store returns requires space and staff time, which can impact the overall costs.
However, retailers shouldn’t be afraid to implement the BORIS initiative. In fact, BORIS can benefit retailers by increasing the foot traffic in-store and presenting an opportunity to offer additional items, when customers come to return their orders. Retailers must carefully manage their inventory to align online and in-store offerings to succeed. By establishing a clear plan to balance the challenges and benefits of BORIS, retailers can truly make the most of this initiative.