Has COVID-19 exacerbated online return challenges?

Discussion
Photo: Kohls
Jul 06, 2020
Tom Ryan

A survey from Inmar Intelligence finds 88 percent of U.S. consumers planning to continue to shop online to avoid crowds, yet 40 percent have held back on purchasing online due to complicated returns processes.

Other findings from the survey:

  • Forty-two percent shared that they now mail their returns due to COVID-19;
  • Eighty-nine percent of consumers indicated that they wanted to receive returns-status updates via e-mail and/or text;
  • Fifty-six percent think it’s easy to return online purchases, yet 58 percent prefer to return purchases in a store.

“The dramatic increase in online shopping means retailers will have to assess their preparedness to handle higher returns volume,” said Ken Bays, VP of product development at Inmar Intelligence, in a statement.

Since the pandemic’s emergence, e-commerce revenues have been running 40 to 60 percent higher through the end of May, according to various reports. Many retail observers are concluding that the store closures and restrictions will significantly accelerate the adoption of online buying.

EMarketer recently predicted online sales would expand 18 percent this year.

“Everything we’re seeing with e-commerce is unprecedented, with growth rates expected to surpass anything we’ve seen since the Great Recession,” said eMarketer analyst Andrew Lipsman. “Certain e-commerce behaviors like online grocery shopping and click-and-collect have permanently catapulted three or four years into the future in just three or four months.”

Estimates for returns of online purchases range from 15 to over 30 percent, with items such as apparel at the high end of that range. That compares with return rate estimates ranging from three to 10 percent for in-store purchases.

Amid the pandemic, retailers are extending return windows given the challenges of returning product to stores. Stores are also setting aside items for at least 24 hours or thoroughly steam-cleaning them to reduce the risk of COVID-19 transmission. Retailers also face longer-term return challenges, such as high expectations for free online returns and the time-consuming steps involved in returning items to selling floors.

DISCUSSION QUESTIONS: What new challenges has COVID-19 created for returns? What further steps should retailers take to ease the online returns process for consumers and optimize it for themselves?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"The e-commerce winners will be those who make BOTH buying and returning easy."
"For non-essential goods that often tap into “disposable income,” something in ever shorter supply, delightful customer experiences are just as necessary as ever..."
"Solving the retail returns problem is easiest when you stop the need for returns before they happen, and this is often where retailers are under-invested."

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20 Comments on "Has COVID-19 exacerbated online return challenges?"


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Mark Ryski
BrainTrust

The new and especially challenging change with returns in the age of COVID-19 is the requirement to quarantine inventory for 24 hours (or some period of time). This extra tracking and holding of inventory is yet another complicated wrinkle in an already complicated process for retailers to manage.

Brian Numainville
BrainTrust

Retailers have to think about the various friction points in the return process and where things can be easily handled while still carefully contemplating COVID-19 ramifications. For example, I had a couple product issues with an online grocery store purchase and the retailer simply credited me and didn’t require me to bring the product back. Easy, but granted a low dollar ring, so not worth it on their part either. On the other hand, my son bought a VR headset that was defective out of the box (after buying it through a click and collect process). When he called the retailer they refused to take it back stating their policy. However he was able to go back to the store and the local people replaced it and provided the kind of service that he expected.

Gene Detroyer
BrainTrust

It sounds like they have a right hand/left hand problem. Having the same return policy for every product no matter how it is returned is the first thing every retailer should do. And provide “the kind of service that he expected.”

David Naumann
BrainTrust

Online purchases have historically had much higher return rates than brick-and-mortar purchases due to the lack of the ability to see and try products. Returns are very costly and complicated for retailers, especially during the pandemic. What is the right thing to do with returned merchandise and how do you ensure it is properly cleaned or disinfected? As a consumer, I diligently check the return policies before purchasing online and this is where Amazon has a big advantage with liberal return policies and free return shipping for many items.

The key for retailers is to communicate returns policies online and at each step during a return to assure customers that they get proper credit for returned items. From a process perspective, retailers need to streamline the internal processes and optimize the resale of returned items.

Jeff Sward
BrainTrust

Returns used to be one of the highest cost elements of the apparel e-commerce business. And they just got even more expensive. Understatement to this model is unsustainable, even in a post-COVID-19 environment. If “free” shipping and “free” returns aren’t sustainable, is there another kind of loyalty or reward program that would keep a retailer on a competitive footing?

Ralph Jacobson
BrainTrust

The pandemic has certainly put pressure on retailers to optimize their returns process, even though they were feverishly working on it prior to the crisis. I think one if the biggest challenges that has been added to the mix is to minimize the new costs of product quarantine, disposal and handling to mitigate the already increasing costs of returns.

Bob Amster
BrainTrust

If customers are returning products by mail and not in person and store associates do not have to handle possibly-contaminated goods — that’s a good thing. It is easier to stage (quarantine?) returns in warehouse-like facilities — that’s a good thing. There may be more returns as a result of COVID-19 and consequently more online purchases — that’s a bad thing.

Steve Dennis
BrainTrust
Online returns have been a ticking time bomb for the industry for many years. Pre-COVID-19, the continued shift to e-commerce was a major headwind to online profitability. Of course this is not a new phenomenon, apparel returns that could run close to 40 percent have been common, going back to the earlier days of mail order catalogs (I speak from experience having worked for three brands that struggled with the cost of returns going back nearly two decades). Many of the more recent wounds are self-inflicted, as the basis of competition ratcheted up to be nearly ubiquitous free returns and exchanges. This spurred a new age of “bracketing” where customers intentionally ordered size or color variations of the same item, knowing they would only keep one (at best). And the further squeezing of e-commerce profitability–particularly in apparel–ensued. Returns in the age of COVID-19 are even more challenging. Not only are we seeing an acceleration of online shopping, some of the steps retailers were taking to stem the tide of rising returns cost are being hampered.… Read more »
Trinity Wiles
Guest

One of the biggest challenges from the influx of returns is new processes. Quarantining and sanitizing returns is an added step/cost for retailers to incur. Returns are already costly for retailers. From the IHL Group (2019) “Retailers worldwide lose $600B each year to sales returns. This has been labeled the ghost economy.” The biggest challenge now is figuring out how to mitigate returns with so many customers shopping online. The next challenge is easing the online return process. One simple thing retailers can do to ease the online return process for customers is providing the return address shipping label. The less work for the consumer, the better. I also imagine we will be seeing more partnerships like Kohl’s and Amazon, where customers can return Amazon items to any Kohl’s store. This decreases transportation costs for Amazon as Kohl’s is acting as a consolidator. More retailers should consider this model.

Neil Saunders
BrainTrust

Returns have always been an expensive and complex part of online. The pandemic has added additional steps to the process for both consumers and retailers, and that has only added to the cost. Moreover, the higher rates of online shopping mean more returns in volume terms and as a proportion of orders – the latter mostly because there are more people unfamiliar with digital shopping trying out the service. There is no way of completely avoiding the cost but part of the solution lies in better visuals including videos, more accurate sizing information, good reviews, and so forth. The more accurate information that retailers provide to customers, the lower returns are because people know and understand what they are buying.

Michael La Kier
BrainTrust

The Reverse-Logistics Conundrum of 2020 is real. Buying online is as simple as one click, but returns are much more complicated – for both shoppers and retailers. The e-commerce winners will be those who make BOTH buying and returning easy.

Oliver Guy
BrainTrust

This is something we were discussing as a family just this weekend. In apparel in particular this could be particularly large as people do not want to visit stores. Also in some places (the U.K. for example) fitting rooms are closed – as a result this weekend we spent £400 in two different stores, then returned well over £300 worth the next day due to fitting issues. Sales numbers could well look artificially high.

Ken Lonyai
BrainTrust

Our experience is that returns have been a disaster. My wife had big challenges dealing with/shipping back returns to both DSW and Lord & Tailor. Saturday Home Depot couldn’t handle a curbside pickup, arguing I was at the wrong store until the manager finally had an “Oops–the customer is right” moment.

Masks and shields are just one piece of making stores hospitable to customers in the present situation. For non-essential goods that often tap into “disposable income,” something in ever shorter supply, delightful customer experiences are just as necessary as ever and both ease of purchase and ease of returns is a HUGE piece of the retail customer experience.

Mark Price
BrainTrust

The battle for e-commerce success in the COVID-19 era will be one of supply chain and logistics. The focus for customer experience for many years has been on generating sales, which of course is essential. Now we have a second level of customer experience challenges, managing returns and inventory management in a cycle where mailed returns are growing exponentially. The need to both successfully manage the flow of goods to and from the customer and to keep the customer in the loop at the same time is non-trivial.

I believe that the challenges of growing returns may provide the business case for widespread use of RFID chips on products, so that they can be instantly identified and checked throughout the supply chain. Automated emails to customers based on RFID triggers will improve experience at the same time. Not a cheap effort but very much overdue.

Andrew Blatherwick
BrainTrust

Returns have always been a problem for many online or omnichannel retailers, and with the massive increase in sales online it is obvious that the returns are also going to increase and apply even greater pressure on an already creaking system for many. This will impact some online retailers badly as their customers can more easily change retailers if they do not get good service at purchase and at return.

This is one of the additional complexities of online retail. You may not have stores but reverse logistics is a major part of the business and has to be thought through and as efficient as the sales engine. Many get it wrong and will not last long if they do.

It is not only the returns process, it is also what you do with the inventory when it is returned. If you are coming to the end of a season this can be a major issue. The cost of working returned goods is high, especially if it then becomes redundant stock.

Ananda Chakravarty
BrainTrust

Just by skimming through the responses here, it’s clear that returns and returns management is a critical and failing part of the retail business. The product journey spans an entire lifecycle from sourcing to restocking. And most important, it is NOT consistent across products and stores. When 15 to 30 percent of products (online) are returned, those returns must be managed. Especially now, when customers continue to seek consistency. With further dependency on the online sale, retailers need to streamline their returns process and management. The first step is making it easy to execute, cost less for the retailer, and manage returns effectively. Looking for ways to support this effort with technology might be a great opportunity.

Kenneth Leung
BrainTrust

I wonder if the liberal returns policy is simply unsustainable with increased COVID-19 costs for collection and disposal. I think certain categories like food or intimate apparel simply cannot be shopped online and returned anymore due to contamination concerns. Costco did that with certain items and most would agree there was no backlash (except for someone hoarding cases of toilet paper or rice). I also believe it is an environmental impact issue between packaging- and shipping-driven pollution. Would it make sense for online retailing to have a tiered return policy based on product categories and return rate by customer? Does the fight for frictionless customer experience have to be balanced by operational and environmental costs?

Zach Zalowitz
BrainTrust

Similar to other things, this pandemic is highlighting existing issues exacerbated by increases in commerce volume. For too long the issue of returns and returns management has been under-served.

The real solution lies in resolving returns before they happen, and retailers should look to ensuring better fit up front in the buying process and expand the use of crowd-sourced reviews in their online buying process to head off returns happening in the first place. Likewise, induction of returned goods back into supply chain has been long misunderstood as a cost-center vs. a competitive advantage, meaning retailers look at it as a cost of doing business and not an opportunity to rebalance (sellable) inventory in their network while “saving the sale” to the customer.

Solving the retail returns problem is easiest when you stop the need for returns before they happen, and this is often where retailers are under-invested.

Craig Sundstrom
Guest

Although there are probably a few concerns related to goods being contaminated, whether or not these concerns are necessary is a matter of opinion. Most of the problem is simply one of volume: returns have always been a bottleneck, so the more sales > more returns > more of a bottleneck.

How to optimize? I think many retailers will be tempted to enact more restrictive policies just to make things go faster, but I’d advise against it. With volumes up, and more people than ever buying, it’s a great time to make a good impression (and with lots of people out of work and most online selling exploding, it’s a good time to make a second good impression by hiring some of those people … even if only temporarily).

storewanderer
Guest
1 month 8 days ago
Many grocers went to an “all sales final” model recently due to the hoarding that was going on. However, there was an exception for “quality problems on meat, deli, produce.” Okay — so also every private label item in the store is covered by a satisfaction guarantee. So really the “all sales final” only applies to national branded packaged goods. US retailers for far too long have been very generous on returns. Some have tightened things up. Go back 20 years and return policies were incredibly loose for most retailers (except electronics retailers who have always been rather difficult). You literally walked up to the refund counter at any major store and presented an item and they gave you a cash refund (often at the lowest selling price in the past 90 days) no questions asked and no receipt. Now we have many retailers with an actual return policy that requires a receipt and limits how long you have to return an item. Even Kohl’s finally moved to a 180 day return policy after having… Read more »
wpDiscuz
Braintrust
"The e-commerce winners will be those who make BOTH buying and returning easy."
"For non-essential goods that often tap into “disposable income,” something in ever shorter supply, delightful customer experiences are just as necessary as ever..."
"Solving the retail returns problem is easiest when you stop the need for returns before they happen, and this is often where retailers are under-invested."

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