What’s the trick to handling online returns?

Photo: RetailWire
Jan 16, 2018
Tom Ryan

According to National Retail Federation, about 13 percent of holiday purchases are returned, but the process has become exceedingly complicated with the arrival of online selling as well as BORIS (buy online, return in-store).

Kurt Salmon has estimated that up to a third of online orders are returned.

A study from Alix Partners analyzes the merits of the three ways retailers are returning merchandise:

  • Return to store: The first choice of consumers, 60 percent of online shoppers were found to prefer returning items to a store. For retailers, store returns are the least expensive and the quickest option to return products to selling floors. On the downside, a store return “eats up a lot of resources and prevents sales associates from actually selling,” and returned items often head straight to clearance.
  • Return to DC: This option, while slower, is less taxing on store operations and a better way to sort goods for resale. Returns of this kind, however, are more expensive and take the DC away from delivering new merchandise.
  • Return to a third party: While the least distracting to store and DC operations and the ideal way to sort goods for resale, this method is the slowest and most expensive option.

Alix Partners recommends considering offering free shipping for online returns and other perks since a hassle-free returns policy makes consumers more likely to buy. Since shoppers often pick up other items when they make returns, stores should be well-staffed and trained, and a special discount or perk could even be used to incentivize store returns. Third-party solution providers rather than DCs for online returns was recommended for the hectic holiday period.

A study released last October by Forrester Research and Happy Returns found 73 percent of shoppers selected “returns” as the least favorite part of shopping online, and 28 percent indicated that they shop less online than they would otherwise because they don’t want to deal with the hassle of returns. The most requested features for online shoppers in the return process were: free returns, immediate refunds, pre-printed return labels, the ability to drop returns to a store and allowing returns without a receipt.

DISCUSSION QUESTIONS: What do you see as the best strategies to handle online returns? Should retailers incentivize in-store returns? What are your thoughts on incorporating returns to the DC or third-party solution providers?

Please practice The RetailWire Golden Rule when submitting your comments.
"While looking at ways to make returns easier for customers, retailers should also be adopting strategies to minimize returns in the first place."
"Understanding returns and how they impact the bottom line is crucial to a retailer. Pricing strategies are important to ensure margins cover returns."
"While it’s tempting to want in-store returns, in hopes that customers will overspend on the return, it’s probably more profitable to return to DC's..."

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15 Comments on "What’s the trick to handling online returns?"

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Paula Rosenblum

The Kurt Salmon numbers are accurate for apparel (it’s like a dressing room!). For other verticals, it’s quite a bit lower, which is how we get to the “blended number” of 13%.

While it’s tempting to want in-store returns, in hopes that customers will overspend on the return, it’s probably more profitable to return to DC’s, better equipped to handle them, and better assurance that inventory won’t be “lost” in the system.

A gazillion years ago I wrote the specs for a returns management system for a catalog company, Chadwick’s of Boston. That’s when I learned just how complicated apparel returns really are. Add onto that the fact that not all stores carry an entire assortment, and it’s a prescription for lost inventory. Well, that’s what has happened. Inventory confusion.

Bottom line: DCs.

Peter Sobotta

Well stated Paula. Adding to this is the fact that every vertical has different processes and opportunities for optimization. Hence a 20% return rate for an apparel company may be great, but for a consumer electronics company this would be terrible.

Having relevance behind these numbers is what matters. Otherwise they are vanity metrics.

Max Goldberg

Retailers should offer multiple avenues for returns. Yes, in-store returns offer the possibility of additional purchases, but they cost more to handle than online returns and consumers don’t want to spend the time waiting in line. Kohl’s taking Amazon returns is a great example of a third party solution — it’s a win for Amazon and for Kohl’s. Just as consumers have many ways to order a retailer’s products, they should have multiple avenues to make a return, with as little time and cost as possible.

Ken Lonyai

I don’t put too much stock into the survey answers from shoppers and accommodating them as much of a solution. For example, many sellers offer pre-printed labels already and returns without a receipt are too fraught with the potential for fraud that it’s untenable.

The biggest problems I’ve encountered are centered around stores that are not fully systemized for returns. Home Depot corporate was required to resolve a return fiasco I had with them. My wife just had trouble in-store with Old Navy which was immediately resolved by calling customer service directly. Lord & Taylor is troublesome from shopping cart through return. The problems here are disparate systems, missing detail on receipts/transaction history (Home Depot and Old Navy both have a big issue here), and confused/untrained staff.

The top solution is hardly costly: fix the data, make BORIS a standard procedure, train in-store staff better. More simply: stores need to take a user-centered view to BORIS instead of glomming it on to existing systems/procedures.

Ben Ball
First off, let’s dispense with “prevents sales associates from actually selling” as a downside to in store returns. Sales associates aren’t “actually selling” anyway. Now if the person being occupied with returns is preventing someone from checking out, that’s a different story. Very high aggravation factor there. Making returns as easy as possible does wonders for customer satisfaction and customer loyalty (chronic/criminal abusers excepted of course). I recently returned a number of clothing items purchased online to a Costco store because of size. I would have just shipped them back, but the return label information was so minimal that this Boomer Luddite was afraid it wouldn’t actually get credited properly. Besides, I wanted the items and figured the fastest way to get the right size was to go to the store. I ran into two problems. The incredibly pleasant and apologetic clerk working online returns kept explaining that all her manual steps and manager approvals were needed because “the store and online were separate operations.” I get it — but it shouldn’t take 15 minutes.… Read more »
Ken Lonyai

Ben — not sure why you “get it” for the separate systems? A fully functional unified architecture for online and in-store has been possible for at least a decade — if only there were the will on the part of retailers.

BTW — you got off easy. I spent over 80 minutes at Home Depot due to their “separate systems” that the staff grumbled about and there were still issues.

Neil Saunders

Retailers need to go with what the customer prefers, and that’s often returning to store. In most cases, this isn’t the best option for retailers. However, as this is a growing problem, putting in place a better reverse logistics process and systems that can identify and manage online returns is vital.

One interesting aside is the issue of attribution if internet purchases are recorded as online sales, but the returns are decremented against store sales. Not all retailers have this problem, but some do, which means the information they officially report overstates online sales.

Ryan Mathews

It seems the future of online returns looks something like the Amazon policy — or at least how it’s supposed to work — print a label, slap in on a package, drop it off with UPS or USPS and wait for an expedited refund. The only additional step I’d take is to accept everything back you sell without question. That’s how you are going to make customers (generally) happy and not clog your stores. The fact is, most companies aren’t good on returns and probably burn up excessive capital and customer good will needlessly. Better to take the hit on potential fraud then to lose one percent of customers because they are dissatisfied with your returns policy.

Jennifer McDermott

Give consumers what they want, and they’ll return again and again. Sure, there’ll be losses in terms of postage and on items that have been returned and cannot be resold, but I believe, for most retailers, the increase in sales and repeat customers will far outweigh these.

While looking at ways to make returns easier for customers, retailers should also be adopting strategies to minimize them wanting to make them in the first place. Detailed product descriptions, clear photos from all angles and size specs should accompany all products so customers know exactly what to expect from that unboxed item.

Gene Detroyer

There is always the thought that if the customer returns the online merchandise to the store, they will buy something else. Well, maybe? But, dislocation of inventory at the store level could become unmanageable and costly.

Make it quick and easy for the customer. Have a return label in every shipment. If the customer wants to go to the store, they can. Encourage them to return it quickly while the merchandise is still alive. There is a benefit for the retailer to have the customer return in days online rather than possibly the weeks it may take for the customer to get to the store.

Lyle Bunn (Ph.D. Hon)

Returns are part of the consumer relationship and brand expression. The use of analytics should identify those relationships where costs outweigh benefits and policies/processes can be applied to address those who take advantage of the retail proposition.

Camille P. Schuster, PhD.

Having consumers be able to get quick approval online for a return, print a label, drop it off at a UPS store, and get a quick refund is most efficient. However, customers do not purchase other items as they do when returning in store. If retailers want people to return in store so customers can shop and purchase other items, then they have to staff accordingly. If that is too expensive then they have to make the first method work seamlessly.

Ed Dunn
2 years 9 months ago

There is an economic benefit in the return opportunity that should be considered. Malls and Main Street town centers accommodating third-party return centers basically created customers with some extra money in their pocket or incoming credit to their account to immediately go shop and find something else. Perfect capture and conversion opportunities not being leveraged to transition an e-commerce customer to a brick-and-mortar customer.

Benjamin Grabow
2 years 9 months ago

The power is in the hands of the retailer to adopt new strategies for online returns. Many are going to need invest in returns with the larger players shaping consumer expectations on reverse logistics.

Right now, most online retailers need to take a piecemeal approach with the various options for streamlining returns and reverse logistics. This is still a relatively new space and there aren’t any wholistic return solutions/companies quite yet. That being said, the retailers that are investing in return solutions/companies will quickly see that returns are an evolving asset as oppose to a liability. The advantages of optimizing returns greatly outweigh the disadvantages.

As many of you have stated, the costs associated with increasing returns are minimal compared to the revenue uplift from happier, stickier customers. It’s going to be exciting watching this space get more and more innovative.

Shep Hyken

Understanding returns and how they impact the bottom line is crucial to a retailer. Pricing strategies are important to ensure margins cover returns. From the consumer’s viewpoint, a retailer with a hassle-free return policy creates confidence and is appealing to do biz with. Knowing how consumers buy and return, and the cost associated with that, is all factored in. When the retailer knows the numbers, it’s easy to properly plan and budget for returns.

"While looking at ways to make returns easier for customers, retailers should also be adopting strategies to minimize returns in the first place."
"Understanding returns and how they impact the bottom line is crucial to a retailer. Pricing strategies are important to ensure margins cover returns."
"While it’s tempting to want in-store returns, in hopes that customers will overspend on the return, it’s probably more profitable to return to DC's..."

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