Santa’s sleigh bells were jingling so loud this Christmas that you probably couldn’t hear yourself think. Or, were those the rings of e-commerce cash registers — millions of them — throughout the country? In the age of internet shopping, Amazon and countless more online shopping giants have replaced Santa’s sleigh with package-laden gift-mobiles, darting to-and-fro our neighborhoods.
But there’s one important difference: Santa uses magic to know exactly what you want for the holidays, so his return numbers are zero. Online retailers aren’t that lucky, so they’ve invented their own kind of magic: liberal return policies.
You probably have a friend who brags about ordering a closet’s worth of pants just to find one that fits. The rest are returned to the retailer, for free!
Are Unlimited Online Returns Even Sustainable?
There’s something “not right” about free, unlimited returns. Even though generous return policies reduce the “hesitation to buy,” bringing millions of shoppers onto the Christmas internet-shopping sleigh-wagon, common sense says that the revenue loss associated with free returns is not sustainable — especially when online shoppers are abusing policies left and right.
According to CBRE researchers, the 2018 holiday season was expected to net $123 billion worth of e-commerce sales from November to December. CBRE projected the returns on those sales to be a jaw-dropping $37 billion. In fact, the magnitude of online returns is so severe that Forbes called it a “ticking time bomb” in early 2018.
You might consider all of these returns a disaster from an environmental perspective, as well. Is it really necessary to waste all those boxes, energy and time just to send something from A to B, and back to A again?
Finally, now that consumers are fully on board with the idea of buying gifts and other items on the internet, are extremely liberal return policies still necessary? And when does the ticking bomb explode to the point that even Amazon can’t afford to do it anymore?
The Online Return Bomb Has Already Dropped
Forbes claims that certain brands are currently getting hit by unsustainable levels of returns, which (among other reasons) have motivated them to open brick-and-mortar stores. Research shows that items bought in physical stores benefit from a radically reduced number of returns, and this puts the most successful retail giants in between a rock and a hard place. The liberal return policies — which were essential to their massive growth and market dominance in the first place — are now dragging down the biggest e-commerce retailers’ bottom lines to the point that some are having to risk their loyal customer bases by tightening the reindeer reins on their ridiculously free return policies.
In the future, online giants may look back at the generous return policies of the early 2000s, and see them as a temporary tool they used to achieve absolute market domination, a tool that they had to drop after economic reality caught up with them. The problem is, we’re not there yet. Destroying a liberal return policy now is risky because most of the competition is still being generous.
Most Online Giants Have Already Started to Reduce Return Loss
Many companies have already started to change their return policies. Amazon and others, for example, are kicking the serial abusers of return policies off their platforms. Here’s a brief overview of how some of the biggest names in the business are dramatically reducing their online return costs.
H&M Canada: H&M doesn’t allow returns for online purchases in their Canada brick-and-mortar stores anymore. This policy requires customers to pay for postage if they want to return internet-purchased items.
Shopify: Shopify bought the company “Return Magic” in an attempt to manage and optimize its returns in-house. Another benefit of Return Magic is that it helps Shopify merchants use data metrics related to their returns to improve the shopping experience for their customers and, thereby, lower the number of returned items.
Best Buy, Home Depot and More: Best Buy, Home Depot, and other large-scale online retailers have started using a service called Appriss Retail, which tracks customer purchase/return histories — kind of like a credit report or credit score — and overrides the return policy at stores to prevent serial abusers from taking advantage of the system.
Amazon: Amazon has already opened 600-plus physical store locations, and it has set a goal of opening 3,000 brick-and-mortar locations by 2021, partly to reduce return loss by giving customers the ability to return their merchandise in person. Amazon has also enlisted support for in-store returns through a partnership with the retailer Kohls. For a giant like Amazon, these strategies save on expenditures relating to the billions of packages they ship annually and the sea of returns these shipments entail.
Indigo: The Canada-based online seller, Indigo, has given bonuses to customers willing to pick up items at a store location after purchasing them online. This brick-and-mortar strategy offers a 10 percent “BOPIS” (buy online, pick up in store) discount, not only as a way to lower return numbers, but also to increase the chances of in-store, impulse purchases by customers who visit the physical locations.
Crack Down on Returns, Make More Money
When you don’t have the magic of Santa to achieve e-commerce success during the holidays, you have to rely on:
- Tweaking your sales metrics
- Sniffing out trends before anyone else
- Turning your website into a finely tuned machine
- Making transactions and orders as easy as possible
- Finding solutions to any problems that are attacking your bottom line
Especially regarding the last bullet, any strategy to reduce your return losses will definitely help your overall business strategy and profit margins. Therefore, as we move deeper into 2019, keep an eagle’s eye on what the competition is doing in this space — and brainstorm creative, money-saving solutions of your own to reduce return loss.
References:
- https://www.deseretnews.com/article/900047999/product-returns-are-a-growing-issue-for-online-retailers.html
- https://www.forbes.com/sites/stevendennis/2018/02/14/the-ticking-time-bomb-of-e-commerce-returns/#1a8271dc4c7f
- https://www.businessinsider.com/amazon-bans-people-too-many-returns-2018-5
- https://www2.hm.com/en_ca/customer-service/returns/returns.html
- https://business.financialpost.com/technology/shopify-buys-montreal-startup-to-beef-up-return-game
- https://www.businessinsider.com/amazon-best-buy-track-returns-blacklist-shoppers-2018-5
- https://www.shop.ca/deals/10-off-with-store-pickup-indigoca-697
