Are Retailers Breaking Up with Returns in 2021?

Returns are one of the most expensive parts of the retail industry. As e-commerce continues its domination, the rate of returns is rapidly growing alongside it.

However, retailers are starting to dismantle their old ways and telling customers to keep their products rather than return them. Is this a wise move from retailers, and will this change the way the returns policy will look like in 2021 and beyond?

Is it cheaper for retailers to let customers keep their unwanted items, rather than processing a return? In the United States, retailers such as Target, Walmart and Amazon are using AI to determine the necessity of these costly returns.

“Retailers have been allowing customers to keep low-value transactions instead of returning them for some time,” shared Sucharita Kodali, Retail Industry Analyst at Forrester, on LinkedIn.

“We did a study with Narvar awhile ago and found that about 12 percent of people said their last return was a refund where they got to keep the item.”

In a study from Narvar, 12 percent of people said their last return consisted of a refund, and the customer keeping the product. Thirty-six percent of customers returned their items by taking the package directly to a carrier, and 20 percent scheduled a carrier to collect the return.

Only ten percent said they returned the item in-store, and 16 percent dropped their return to a designated drop-off location.

This isn’t a new approach, but it is becoming a newly-adopted process for larger retailers that have relied on their returns policies for years. In Australia, many online retailers that utilise dropshipping will refer to this return policy – allowing customers to get a full or partial refund but letting them keep the items.

Another benefit of the sweeping trend is its environmental factor without the hefty courier load on returns, the better for the planet. Furthermore, supply chains can reduce the strain, and couriers can focus on last-mile.

What can customers do with these items they wish to return? American retailers such as Target, Walmart and Amazon encourage customers to donate the goods to a charity or op-shop. Alternatively, you may see them sell the goods on online marketplaces such as eBay, Gumtree or Facebook.

The resale category is another fast-growing segment of the retail industry, and will only continue to expand if a new returns policy is introduced.

The pandemic has proven to accelerate the innovation and growth strategies of online retailers across the planet. With the hefty price tag attached to a return of a bulky or oversized item, this could be the next best thing for retailers and customers alike.

“We are getting so many inquiries about this that you will see it take off in coming months,” said Amit Sharma, the Chief Executive of Narvar Inc.

While this may seem like an easier way out, and an alternative for retailers, it may not always be an attractive option for shoppers. If customers have the option to keep an item and receive a full refund, this can open the doors to potential scams and fraud.

But there is a risk with anything new or established, so this shouldn’t put retailers off from the opportunity.

The Christmas season isn’t just massive for online purchases; it’s also a season for returns. As retailers adapt to the costly returns policies, they also have to adapt to the world around them.

In 2019, the in-store return process was cheaper than paying for couriers, processing and packaging. However, as the pandemic swept through Australia and the world, customers may feel less safe going in-store to return an item.

In a report from Doddle, 72 percent of Aussie shoppers review a returns policy before they make a purchase online.

“All retailers understandably want to mitigate the impact of returns on the bottom line; but making the process harder or less attractive for the end consumer is not the way to do it. The research indicates that this mindset will actually result in fewer customers, which no retailer can afford in this challenging climate,” shared Justin Dery, the Doddle APAC CEO.

Before introducing the new returns policy, however, retailers should address why customers make frequent returns. Better customer experience can help reduce return rates.

H&M began working on this issue by onboarding live chat tools, discussing the reason why customers want to return an item, and encouraging different purchase patterns that may result in fewer returns.

Why do customers buy things they will ultimately return? For fashion lovers, buying the incorrect size is one of the biggest reasons for a return. ASOS offers automated recommended sizing, and Sephora utilises AR to help customers pick the correct shades when shopping online.

Retailers must evaluate the items they sell online and in-store. If a customer purchases something and wishes to return it, but the retailer refuses to take it back, is it worth selling at all? Why sell something you don’t want to take back?

As e-commerce continues to expand and grow in Australia and worldwide, the need for a comprehensive and cost-effective returns policy is necessary to develop a profitable business.

However, before retailers begin giving away their items in exchange for a refund, they need to understand why customers are returning an item and make sure they are selling something worth keeping.

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