Home Retail Why You’re Going to Pay for the Online Return Mess

Why You’re Going to Pay for the Online Return Mess

by Ozva Admin

One of the bases of online shopping has been free returns, but not anymore.

After years of subsidizing them, more retailers are charging customers to return unwanted products. It’s a risky move because shoppers have become accustomed to buying an item in multiple sizes and colors and returning what doesn’t fit for free.

The list of retailers that are cutting back includes Zara, Abercrombie & Fitch and Boohoo. In the US, the number of large retailers requiring a return fee has increased from 31% to 40% this year, according to research from Narvar, a logistics software company.

“I expect others to follow,” said Honor Strachan, an analyst at research and consulting firm GlobalData Plc. “It only takes one, and the others will think, ‘Well, if Zara can do it, we can do it, too.’”

The setback in returns comes after the e-commerce industry spent the last two decades removing costs from supply chains and customer service. But returns had barely been touched, leaving them one of the few places with a lot of room to cut costs. They are expensive due to the labor to ship them back, inspect them, and prepare them for resale.

Investors are also crying out for online businesses to become more profitable (or profitable) in a shift away from a relentless focus on growth.

The pandemic also played a role, causing a surge in online shopping, which has since receded, as the masses stayed away from brick-and-mortar stores. That meant more returns, and disruptions from Covid-19 created excess inventory in categories like apparel, which is expected to increase discounts and the ability for shoppers to return products when they see better deals.

A volatile economic environment this holiday shopping season has added to the pressure.

Consumers experiencing the highest inflation in four decades are more frugal, increasing the chances they’ll second guess a purchase and send it back, according to Amit Sharma, CEO and founder of Narvar. Higher transportation, energy, and labor costs have made returns even more expensive, raising the stakes for chains to change their behavior.

“That’s the big question: How do we reset expectations?” said Sharma, who previously held senior positions at Apple and Walmart. “Everyone is losing money on shipping and returns.”

Online retailers soon realized they needed to earn shoppers’ trust before handing over their credit card number to a website and buying a product they hadn’t seen in person. Free returns helped put consumers at ease. An early adopter was shoe retailer Zappos, now owned by Amazon, which allowed customers to order multiple sizes and return what didn’t fit without additional fees.

The industry followed, and now it will be hard to wean the masses off free returns. The practice of buying multiple items online to try on at home, now known as bracketing, increased during the pandemic when fitting rooms were closed. About two-thirds of US shoppers engage in the practice, according to a survey this year by Narvar.

Social media platforms like TikTok and YouTube have made bracketing more popular thanks to so-called “test ride” videos asking followers to comment on whether the shopper should keep or return purchased items. .

Return fraud, with tactics like returning a counterfeit item, is also on the rise. In the US, about 10 percent of the $761 billion in returns made on all purchases last year were fraudulent, according to research by the National Retail Federation, an industry group. And online purchases have a higher rate of return of nearly 21 percent, up from 18.1 percent in 2020.

Retailers increasingly see returns as a threat to their business. ThredUp recently said that return rates are increasing, causing a $3 million hit to sales in its most recent quarter. And the online reselling platform charges $1.99 for what it calls a “restocking fee” if an item is returned by a customer.

Earlier this year, London-based Asos cut its annual guidance, saying a significant rise in yields in the UK and Europe hurt sales. He added that increasing returns coupled with inflation have a “disproportionate impact on profitability,” but said he would keep returns free for customers.

The networks are employing a number of tactics to lessen the financial hit. Some are shortening the time a buyer has to return an item. Bath & Body Works said it won’t allow the return or exchange of products that show “excessive wear,” a notable shift from the personal care brand that has allowed customers to return used products.

One approach that retailers like Amazon and Target are taking with low-value items is to refund a return, but let the customer keep the item. In this case, the retailer figures that it will save money to avoid the costly process of trying to resell a returned item. It’s a strategy that’s catching on, with the number of traders using the tactic jumping 1,700 percent in the first half of 2022, according to Narvar.

Of course, these tactics don’t address the main reason so many online purchases are returned: adjustment. The industry has tried to use technology like augmented reality to help shoppers make better decisions with virtual dressing rooms, but those tools haven’t been widely adopted despite heavy investment.

“Size is a huge problem to solve in e-commerce, especially with clothing,” said Katia Walsh, director of strategy and artificial intelligence at Levi Strauss & Co. “It’s something that companies have to solve, and we’re doing everything do my best to do that.”

By Allison Smith and Katie Linsell

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