Photo: RetailWire
The rise in online shopping is worsening the returns burden for retailers.
The three underlying drivers are seen as:
A high online returns rate: With consumers unable to try or directly experience the product, as much as a third of online sales are returned, estimates Kurt Salmon. Returns at physical stores are estimated to be closer on average to 8 percent. As online shopping expands, returns for the industry are expected to keep growing.
High-return expectations: Free online returns have now become an expectation. Ninety percent of all retailers are providing free delivery for at least some online purchases, up from 78 percent in 2014, HRC Advisory told Bloomberg. While shipping costs are rising due to new pricing policies from UPS and FedEx, "free returns" have to be baked into e-commerce fulfillment costs.
Online returns to stores: Many stores now enable online purchases to be returned to stores. While that eliminates the "free returns" shipping expense for retailers, it creates logistical and channel attribution issues. Should the item head to the sales floor or back to the online warehouse? Do store staff, including any on commission, gain any credit for handling the online return?
At both the store and online level, lenient return policies — including extended holiday return windows and returns without receipts — are already opening retailers up to margin risk for items that have to be sold off at deep discounts. The National Retail Federation also estimates that 3.5 percent of holiday returns this year will be fraudulent, up from 3.0 percent in 2014.
- Retailers Estimate Holiday Return Fraud Will Cost $2.2 Billion In 2015 - National Retailer Federation
- Some Stores Naughty, Most Nice; Many Now Offer Free Return Shipping on Internet Purchases - ConsumerWorld
- 15 Stores With the Best and Worst Return Policies - gobankingrates
- More Retailers Offering Free Shipping on Returns - Wall Street Journal
- Rise of Online Shopping Adds to Retailers' Gift Return Headaches - CNBC