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Should customers be offered discounts to keep returns?

December 27, 2021Written by Tom Ryan

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According to a Pymnts study, 45 percent of holiday shoppers would be willing to keep items they were planning to return in exchange for just a 10 percent discount. That figure climbs to 51 percent for a 20 percent discount and 59 percent for a 30 percent discount. The study, based on a survey of nearly 3,000 U.S. consumers at the tail end of the 2020 holiday season, found that many customers were open to taking a discount for all the major reasons returns are made. The survey found that for a 30 percent discount:

Forty-nine percent would keep a planned return due to a mistake in size/color/style.
Forty-two percent would keep a planned return related to quality issues.
Forty-four percent would keep a planned return for an item they no longer wanted.
Seventy-one percent would keep a planned return tied to shipping problems.
Fifty-seven percent would keep a planned return on an item in which they located a better or less expensive item.

Net-net, a discount of 30 percent or even higher appears to be worth it economically, given the costs of reverse logistics. The just-released CBRE-Optoro annual report estimates that, on average, it costs $33, or 66 percent, of the price of a $50 item for retailers to process a return, up from 59 percent last year. Costs vary greatly by item. Factors contributing to the high cost of returns include transportation, processing, discounting and liquidation losses. To manage returns more effectively, Optoro noted that some retailers are letting customers keep or donate unwanted items rather than returning them, neither of which allows the retailer to recoup the item’s value. A Wall Street Journal article from January 2021 found Amazon, Walmart, Target and Chewy among retailers increasingly participating in the practice. Retailers are also investing in automating the decision-making process to route returns to the next most profitable channel. CBRE estimates that at least 30 percent of holiday purchases will be returned. Returns are expected to increase 13 percent year-over-year, in line with NRF’s holiday sales forecast. Given online’s higher-than-average return rate, returns are expected to be up 45.6 percent over the previous five-year average.

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