Syndicated article. Original article published on BestStocks.com.
E-commerce returns have become a significant challenge for retailers, posing various issues that affect their profitability and customer satisfaction. With return rates averaging between 20% and 30%, retailers must address these challenges effectively to thrive in the competitive online market.
The Landscape of E-Commerce Returns
High Return Rates and Their Impact
One of the primary issues retailers face is the high return rates in the e-commerce industry. The National Retail Federation reported that US shoppers were expected to return more than US$761 billion worth of goods in 2021, which continues to rise. These returns create operational complexities and have a substantial financial impact on retailers.
Factors Influencing Returns
Several factors contribute to e-commerce returns, including dissatisfaction, incorrect sizing, and discrepancies between the product and its online description. Addressing these issues requires a strategic approach that modernizes supply chain operations and optimizes the returns process.
Solutions for Effective Returns Management
To tackle the challenges of e-commerce returns, retailers are advised to modernize their supply chain, optimize their returns strategy, and implement effective tracking and fraud prevention processes. Innovations such as in-store drop-offs at non-competing businesses and AI and machine learning technologies are employed to improve the returns process.
Addressing High Return Rates
The first step in managing e-commerce returns is addressing the high return rates. Retailers must understand the root causes of returns and take proactive steps to reduce them. This involves improving product descriptions, providing detailed sizing information, and leveraging customer feedback to enhance product quality.
Modernizing the Supply Chain
A critical aspect of adequate returns management is modernizing the supply chain. Retailers must streamline operations to ensure products are accurately picked, packed, and shipped to customers. Advanced inventory management systems can help minimize errors and reduce the likelihood of returns due to shipping mistakes.
Optimizing the Returns Process
Optimizing the returns process is essential for both retailers and customers. Retailers should offer hassle-free return options, such as prepaid return labels and easy-to-follow instructions. Additionally, implementing a robust returns tracking system enables retailers to monitor the status of returned items and process refunds or exchanges promptly.
Fraud Prevention Measures
Return fraud is a significant concern for retailers, costing them billions annually. Retailers should implement fraud prevention measures such as return authorization systems, which verify the legitimacy of return requests. Furthermore, using AI and machine learning technologies can help identify patterns indicative of fraudulent behavior.
Environmental Considerations and Customer Loyalty
With a growing concern about the environmental impact of e-commerce returns, retailers are exploring eco-friendly return options to meet consumer preferences. Providing a quick and hassle-free returns process is also essential for improving customer loyalty and increasing retailers’ bottom line.
Eco-Friendly Return Options
Retailers are increasingly considering the environmental impact of returns. They are exploring options such as consolidated returns, where multiple returns are bundled into a single shipment, reducing the carbon footprint associated with return shipping. Additionally, some companies are partnering with eco-friendly packaging providers to minimize waste.
Enhancing Customer Loyalty
A seamless returns process can significantly impact customer loyalty. Customers who experience a straightforward and efficient return process are more likely to continue shopping with the same retailer. Providing clear return policies, responsive customer support, and convenient return options can foster consumer trust and loyalty.
Adapting to Global Events and Legislation
Global events, changes in customer behaviors, and new customs and duties legislation can significantly impact e-commerce returns. Retailers must remain agile and adapt to these changes to stay competitive.
Impact of Global Events
Global events, such as the COVID-19 pandemic, have profoundly impacted e-commerce returns. With disruptions in supply chains, extended delivery times, and changing consumer preferences, retailers have faced challenges in managing returns effectively. Flexibility and adaptability have been essential to navigating these challenges.
Changes in Customer Behaviors
Customer behaviors and expectations regarding e-commerce returns are continually evolving. Retailers must stay attuned to these changes and adjust their returns policies and processes accordingly. For example, offering extended return windows and accommodating flexible return options can align with shifting customer preferences.
Legislative Considerations
New customs and duties legislation can also impact e-commerce returns, especially cross-border e-commerce. Retailers must stay informed about regulations and compliance requirements changes to avoid disruptions in international return processes. Collaborating with customs experts and legal advisors can ensure compliance and minimize risks.
Emerging Solutions to the Returns Problem
Makip is expanding its presence in the US with a focus on addressing the significant issue of returns in the retail and fashion sectors. The problem of ill-fitting clothing purchased online has driven a substantial $38 billion returns problem, and Makip aims to provide a solution.
Makip offers a virtual ‘try on’ technology that guides online shoppers to choose the right-sized items, with the goal of reducing the high return rate of 24%, which is projected to cost US retail and eCommerce businesses $25 billion in processing costs in 2023.
The company’s Unisize technology is already used by over 250 online retail/eCommerce sites and well-known fashion brands, including Tommy Hilfiger, Calvin Klein, and New Balance.
Shingo Tsukamoto, President of Makip, acknowledges the returns crisis in US retail e-commerce, primarily driven by poor-fitting clothing. He emphasizes the need for virtual sizing technology that recognizes individual body size requirements.
Unisize integrates with a client’s website in as little as one month, allowing online shoppers to virtually ‘try on’ clothing and make more accurate purchases. This results in an average 20% reduction in clothing return rates. The technology collects basic information from shoppers, such as age, weight, and height, to determine body measurements. Unisize then matches these measurements to the selected clothing item, showing how it would fit the individual’s unique body size. The ultimate aim is to minimize returns while improving the overall online shopping experience and increasing purchasing decisions by 2.5 times.
Conclusion
In the world of e-commerce, managing returns is a complex challenge that retailers must address effectively. By staying informed about the latest trends and implementing strategic solutions, e-commerce retailers can navigate these challenges, enhance customer satisfaction, and ultimately improve their profitability in the rapidly evolving online marketplace. With a focus on reducing return rates, modernizing the supply chain, optimizing the returns process, preventing fraud, and addressing environmental concerns, retailers can successfully manage e-commerce returns and thrive in an increasingly competitive landscape.
