Increase in online purchases piles more pressure on return policies

Accelerated increase of consumers shopping online

PwC’s Black Friday 2020 survey shows a forthy percent rise in the number of consumers shopping online over recent months, a trend we expect to continue beyond the holiday season. In addition, we anticipate rising consumer expectations with regard to fast and flexible delivery and pickup, plus demands for a seamless and unlimited return policy.

Return policy determines consumer purchasing decisions

This means new challenges for retailers, with consumers expecting returns and exchanges to be free of charge. Another recent PwC report has more than half of consumers (53 percent) making buying decisions based on return policies, making free shipping and return shipments a competitive factor.  

Free returns add extra costs

Unfortunately for retailers, free returns are not free for the business and increase costs in various ways. As well as shipping and increased labour for inspection and restocking, large parts of the returned inventory are no longer in good enough condition to sell at full price.

Optimising purchasing decisions

So, how can retailers respond and limit costs as much as possible? The first and most obvious response is to optimise the client’s initial decision to buy. Think digital fittings, standardising shoe sizes or using 3D tools on phones to envision furniture in their home.

Insight into actual return costs

It is also important to gain insights into the actual cost of returns. This can be achieved by utilising so-called ‘cost to serve’ models which map all the costs incurred to make, distribute, sell and market a product or service. By sharing this information throughout the company, the Sales dept., for instance, will feel what it actually costs to offer all those free returns. 

Improve how products are packaged and sent

Another method is to improve the way you package and ship your products. Allow customers to see the goods without unpacking and possibly damaging the product, and make shipment packaging easy to use for returns. Create solid return logistics in your stores or at drop-off points and prepare to resell items at store locations.

Here’s some more food for thought to improve the process:

• Reward and encourage good behaviour

Just as in traditional stores, there are good reasons to ensure online returns are possible. But you should keep this as an exceptional customer journey, doing everything in your power to reward and encourage those who make a conscious decision upfront. This involves providing the best possible insights on the original purchase and clarifying details (sizes) to lower the chance of return rates.

• Dare to act on the biggest returners 

Across the various sub-sectors in retail, but specifically in apparel, we see a small group of customers being responsible for a significant percentage of returns (particularly by placing large multi-size and colour orders). Significant reductions can be achieved by targeting these groups.  

• Consider regulations and directions

Because it is a crucial differentiator in the current market, return policies are not easy to change without consensus or direction from market regulators. At the same time ambitious sustainability goals need to be met, which may lead to conflicting choices. The retail sector would benefit from taking the lead in the development of the relevant regulations itself, otherwise it will end up in the hands of regulators or government.

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