When customers purchase products online, returns are inevitable to an extent. They may return products for many reasons – receiving a damaged item, incorrect product, it looks different than how it looked online, etc. Some users may also order multiple sizes or colors deliberately to select what fits them perfectly. In a customer survey, 91% of the respondents indicated that the return policy impacts their purchasing decision to a great extent.

The reason is simple – when customers know they have the option of returning a product they are not satisfied with, they are likely to buy more and make impulsive purchases. However, as much as the returns process adds to the customer experience, there’s an ugly side of returns for your business.

According to Statista, in the US alone, return deliveries would cost $550 billion by 2020, which is much more than the previous years. This atrociously large figure does not even include restocking costs or inventory losses. Besides chipping away at your pocket, returned goods are also impacting the environment adversely due to a shortage of space and resources to handle it.

Data reveals that every year in the US, about 5bn lbs of returned goods, equivalent to about 5,600 fully loaded 747 jets, go to the landfill, only because these products are not resold or repurposed due to poor reverse logistics management, despite being in perfect condition in many cases. 

Return rates in retail and commerce

You can see the average rate of returns in e-commerce is 20%. However, this number surges to about 30% in the holiday season, owing to the gifting spree.

most returned product in ecommerce

Returns and Profitability 

It is a fact that returns make e-commerce much more attractive to shoppers and a large percentage of customers are deterred from buying online if they must pay for return shipping or restocking fees. 

Retailers have accepted that high returns are part of an e-commerce business. However, they also agree that while returns are integral to driving sales, they also lead to significant losses, primarily due to the high costs of reverse logistics management.

As a result, retailers are turning to technology aimed at eliminating returns but preventing them at the outset. Here are smart technology solutions that can be integrated into the sales process to reduce the number and cost of returns without impeding the user experience. 

1. Use of Intelligent Technology for Better Product Fit

At present, most shoppers are using their homes as a dressing room. However, technology can change this with the use of apps like Sizer. It utilizes self-scanning computer vision fitting technology to accurately generate body measurements through a simple scan and determine the best-fit size recommendations for users based on deep learning algorithms.

Many brands are integrating virtual fitting rooms into their e-commerce apps to enable the users to dress up their ‘virtual avatars’ in various products before buying something they like. Sephora and Ikea are two leading brands that are using AR/VR technology to give their customers an in-store experience on mobile, successfully boosting their customer experience and reducing returns through a try-and-buy approach that creates a highly personalized experience for shoppers and ensures better fitting.

Over time, user data can also be used for hyper-personalization to create a style profile based on body shape, preferences, social profile, etc., to deliver a highly curated product list to users.

Another simple idea is to market e-vouchers as perfect holiday gifts, which give the users the choice of buying what they like, leading to less confusion for the buyer, low chances of return, and lesser pollution and return costs for your business.

2. Encouraging Customers to Return Products in Store

Online retailers spend a lot of money on organizing reverse pick-ups, followed by quality checks before processing a refund. Not only tedious and cost-intensive, but it may also lead to late refunds that often irk the shoppers.

An intelligent solution was implemented by Amazon that offers 18,000 drop-off locations to customers for a wide variety of products. Amazon customers may also return unwanted items at any of the Kohl’s departmental stores, free of charge. Many of these outlets don’t even require the customers to repackage the items, as they only need to show a QR code to process the returns.

Shoppers save on shipping costs, repackaging issues and can expect instant refunds. Amazon saves time and money on arranging pick-ups and quality checks, while Kohl’s can expect more store footfall. Another significant advantage of BORIS (Buy Online, Return in Store) for retailers is the opportunity to cross-sell and upsell products when customers physically visit a store to return the product. 

3. Preventing Return Fraud

According to NRF estimates, return fraud is quite common and goes up during the holiday season. Return fraud may include ‘wardrobing’, which is using a product and returning it in the garb of an unused item, or ‘counterfeiting’, which is replacing original products with counterfeit items before returning them.

Return Fraud by Receipt and Channel
Image Source

One way to prevent such fraud, especially counterfeit luxury goods, is the integration of smart tags, which can be put on a blockchain to ensure the authenticity of returned products. In fact, blockchain and visual analytics can be used to verify the legitimacy of every part of the supply chain, saving both the buyers and manufacturers from fraud. 

4. Processing Returns Swiftly and Efficiently

Many of the returned products are fit for resale, yet they languish in warehouses due to long inspection times and poor logistics. Especially in the case of apparels and electronics, trends change quickly, and new styles replace older ones within a matter of weeks, leading to depreciation in value.

To minimise such losses, companies may use machine learning and data algorithms to determine the highest value channel for every returned item. Other technology solutions that can bridge the gap between return and re-circulation include dynamic routing of parcels using machine learning algorithms and transfer of items to discount retailers using an intelligent supply chain to recoup some of the costs.

The Bottom-Line

While e-commerce businesses can’t stop returns or charge users for them, as it would severely impact their user experience, they can certainly turn to technology to offer better product-fit to customers while also securing the reverse supply chain to expedite restocking and prevent fraud.

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Shwetabh Mittal

Posted by Shwetabh Mittal

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