To the Point of No E-commerce Returns

e-commerce returnsAs e-commerce returns volume continues to skyrocket alongside continued growth of online shopping, top shippers are challenging the notion of returns as a cost of doing business they must accept. In some cases, in fact, a lot can be done to counter the growth of returns from an operational perspective, and many of the world’s biggest retailers have identified game-changing insights by looking at the returns process more critically. In 2020 and beyond, look for sellers to continue evaluating the right way to execute returns while they increasingly look beyond execution and open their eyes to the analytics of e-commerce returns and how they can work to combat and reduce them.

The volume of e-commerce returns continues to climb

Early findings and estimates of the 2019-2020 holiday season point to continued and rapid growth of e-commerce returns. Digital Commerce 360 outlined some growth metrics in its New Year’s Eve article, “E-commerce returns to jump 26% Jan. 2:”

  • UPS predicted a 26% YoY increase in returns on Jan. 2, which it calls National Returns Day; this would amount to 1.9 million returned packages on this day, via UPS alone.
  • Real estate and investment firm CBRE Group “estimates the return rate for online orders will be 12-30%, while just 8% in stores,” and this could amount to more than $41 billion in returns of products purchased November 1 – December 31.

Returns execution: brand values should dictate processes

While fulfillment has long been considered a critical element of a brand’s promise, many shippers are only now beginning to look at returns in the same light. Customers won’t continue buying from brands that under-deliver, after all, and the returns process should extend the positive experience of the initial order fulfillment. As they audit and establish returns processes, sellers set customer expectations, and at least two primary considerations should guide this policy development:

  1. The nature of the brand and the products it sells

A wide array of product attributes can steer the returns policy of a seller. When spoilage is an issue, for example, returns may need to happen fast to protect the viability of the goods, or returns may not be an option at all. A much more common consideration for many brands, however, is where their products fall on the continuum of luxury.

On one end of the spectrum, luxury goods typically warrant an all-out effort to ensure customer satisfaction and increase the odds they’ll come back to make their next purchase. These goods sell at high price points, and like the initial fulfillment process, the service, ease and reliability offered to customers as part of the returns process matter far more than the associated cost. Most luxury brands focus primarily on making the process easy, often including pre-arranged return shipping labels right in the initial shipment, giving customers what they need to quickly and easily return their purchase for a refund or exchange.

  1. The margins of products sold

On the other end of the luxury spectrum, lower cost products typically command smaller margins and do not allow for this level of customer service. Sellers discourage returns, because the executional costs of returns can wipeout already slim margins. Sellers of these goods may require customers to login to request an exchange or even charge them for return shipping.

Considered together, these themes can help shippers establish and maintain the most effective returns policies and processes.

Analytics will gain steam in 2020

While effective returns execution is extremely important, sophisticated sellers who move past execution to be more analytical can begin to proactively combat the growth of or even reduce e-commerce returns. In many cases, this means putting a person or team in charge of solving this problem and allocating the resources necessary to study e-commerce returns and evolve. With the analytics that often result, shippers can dig into returns data to unlock a trove of critical business insights, including:

  1. Cost reduction opportunities being overlooked

Is carrier service selection for returns following the same careful processes put in place for outbound shipments? Considering factors like origin, destination and urgency when selecting a carrier service can provide the same cost reduction benefit for returns.

  1. Identifying weak links in fulfillment

Are the wrong products being shipped? Can these be traced to certain distribution centers, pickers or procedural problems? With analytics and reporting, problems like this can often be traced back to the root and corrected by adjusting inventory and warehouse management processes or taking other steps.

  1. Determining and attaching the cost of returns to outbound shipping costs

Many e-commerce businesses, including Warby Parker, Rent the Runway and others, expect every e-commerce delivery to be returned, and they build the cost right into their products and services. Traditional sellers have begun to take notice, and they should look to analytics and reporting to better understand the cost of processing returns. Once armed with intelligence on the cost and rate of returns, either across the board, by product or by some other form of categorization, shippers can carefully integrate these returns costs into the initial cost of outbound shipments.

  1. Which products are most returned? What can be done about this?

When the lion’s share of a brand’s returns originate from the same product or product category, careful consideration should be taken, and difficult decisions may be warranted. Only with an analytical view of returns can a shipper gather the information required to identify the most-returned products and justify such extreme measures as discontinuing product lines or only selling certain products in-store.

  1. Have fraudulent returns had an impact?

Luxury brands in particular need processes in place to ensure they never accept counterfeit products as legitimate returns. Even infrequent instances of fraudulent luxury product returns can wreak havoc on organizations, and every effort should be made to determine how often this happens and deter future instances.

These are just a few examples of the strategic insights shippers can glean by taking a more analytical view of returns. As e-commerce keeps growing in 2020, look for more large and mid-tier sellers to adopt a more proactive approach to returns resolution.

Ken Fleming is president of Logistyx Technologies, the leader in Transportation Management for parcel shipping. Since the mid-1990s, Ken has led successful launches of many new technologies and services, including supply chain management, e-commerce, SaaS, and enterprise software and systems integration solutions. Ken can be reached at ken.fleming@logistyx.com.

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