Are Returns a Problem for Businesses?


In an ideal world, a retailer sells the goods, and a consumer buys them, happy and satisfied with the purchase. If luck is on the seller’s side, then that consumer will likely come back to buy more. Perhaps they might be tagging along some friends.

In reality, not everyone will have a positive buying experience, so returns are a lot more common than shops think. Reports revealed that at least 5 percent of in-person sales result in product returns. The rate is higher, however, for online sales at a whopping 40 percent.

Worse, returns are expensive. CNBC once reported that, on average, returns account for about 30 percent of the purchase price. Keep in mind that most online goods sold have an average margin of only 10 percent.

It isn’t surprising, therefore, that many businesses dread returns and avoid them at all costs. But are they really a headache? Perhaps they can open more opportunities for growth and success.

The Major Issues with Product Returns

Returns happen for a lot of reasons, particularly for online items. Although there’s no official study about it, customers are likely to send back the products because:

• They don’t match the images or product descriptions on the website.
• The items arrived too late that the buyer doesn’t have any need for them.
• The goods arrived damaged.
• They are not the appropriate size.
• They are not what the customers wanted.

The odds of experiencing returns are also higher for e-commerce shops because buyers don’t have the chance to experience the products before the purchase. They have to rely on reviews, descriptions, and other information available online.

But some experts believe that product returns are becoming more common because businesses encourage such a culture. Big retailers, for example, make it easy for consumers to send back the item even with free shipping. Thus, when customers buy online and receive the product, they expect to see a return label and get free shipping.

These are the costs that fledgling businesses cannot afford if they want to survive, especially since “free shipping” isn’t the only related expense.

When someone returns the goods, companies may also need to rent more space to accommodate them once they arrive. They may even hire more people to process every return and the inventory facility.

As soon as the products go back to the seller, their market value drops, and the business owner immediately incurs a loss.

Seeing an Opportunity

Those who don’t want to incur these costs can sell goods without any returns policy—and many do that. However, that can do more harm than good for the business. After all, customers want a returns policy in the first place.

A 2018 UPS study highlights the benefits of having product return options for businesses, including its ability to boost customer loyalty and satisfaction. A clearly worded, specific, and customer-friendly policy helps create a positive journey for buyers.

This is especially true for online consumers who, as mentioned, wouldn’t have the same exposure to the products as they would have if they bought the item in a physical store. A good returns policy can provide them with peace of mind, knowing they will have recourse if the item doesn’t meet their expectations for whatever reason.

Moreover, offering returns may lower the risk of cart abandonment. According to UPS, nearly 70 percent of online buyers said that they would check the website’s returns policy before they would make a purchase. Around 15 percent, meanwhile, claimed that they would abandon the cart if such a policy is unclear.

How to Design a Returns Process

Simply put, having a returns policy is not an option—it’s mandatory if the business wants to develop loyalty and make customers happy. But a policy is just half of the equation. The other is the process.

Tracking returns can be a headache as the company grows. Fortunately, one can already invest in ecommerce returns management software to automate the process of reverse logistics.

Depending on the available features, the platform may process returns in different ways, such as via refunds or exchange. It can also potentially lower return shipping costs as they can now analyze the data referring to the supply chain or the movement of the goods.

Lastly, businesses can integrate the same software on their e-commerce website for a more seamless returns process. By making it faster and easier, consumers may feel comfortable and confident to buy.

Retail returns could cost businesses a billion dollars a year. Although these are something that companies cannot escape from, they can certainly pursue many steps to make it less costly while improving customer satisfaction and even retention. That includes never skipping it and providing quality returns policies.