Online return averages are 30% higher and three times the rate of physical stores

Monday, Feb 15, 2021

At the height of e-commerce is the painful reality of returns. Online return rates have skyrocketed from pandemic-fueled shopping, averaging 30% higher and three times the return rate from physical stores.

Free shipping policies have accommodated to many consumers; however, it leaves retailers left to make up for the heavy influx of hidden costs associated with these rates. Shoppers have gotten in the habit of ordering multiple sizes of items, and then simply returning the extra items afterwards. The issue is, it’s not that simple. And for a typical retailer, every $1 million in returns can translate to $500,000 in additional costs.

Amazon and Walmart are among the few retailers that have introduced a new method for returns. They will process the item, and then let consumers keep that product afterwards. This helps to eliminates some of the costs associated with returns, and often makes the most financial sense. For low-priced items, it can cost more money to send it back than it’s even worth.

Successfully replicating the in-store experience in an online setting is tricky, and rarity in today’s environment. Finding the correct size is difficult when shopping online, and while virtual try-ons are gaining traction, they still don’t replace the act of physically trying on items in a store.

“Consumers are looking to recapture some of the magic that happens when you walk into a store and can try things on,” said Raghav Sharma, Co-Founder of Perfitly LLC, a technology company that powers virtual fitting rooms for retailers.

To help ease return issues, retailers need to gain a deeper understanding as to why shoppers are returning products in the first place. That can be difficult when most consumers don’t provide the right reasons.

“At least 90% of customers don’t give the right reason for why they are returning. They tend to pick the first answer in the drop-down box,” said Navjit Bhasin, Chief Executive Officer at Newmine, a company that measures consumer returns.

It seems like there’s a lack of solutions to reduce online return rates. However, in a post-pandemic setting, more consumers will return to brick-and-mortar stores and this average will likely decrease significantly. Direct-to-consumer brands have been making the transition to brick and mortar, and let’s face it – consumers prefer the capabilities that physical retail provides. Integrating an omnichannel approach allows for retailers to cater to both consumer types, while eliminating some of the frictions that e-commerce can cause.

Source: Stores Have a Mission – WSJ
Photo Credit: Unsplash

SREG's operational & investment Insight, Expertise & Experience

Find out how SREG's unparalleled level of service, unprecedented expertise, and in-depth industry insight can transform your assets and create significant real estate value.

Subscribe to SREG's The Deal

Your privacy is extremely important to us. We will not share, sell or distribute your information outside our company.

Subscribe to SREG's The Deal

Your privacy is extremely important to us. We will not share, sell or distribute your information outside our company.