E-Commerce Growth Spawns Unwanted Side Effect: More Holiday Returns Featured

  • Written by  Glenn Taylor
E-Commerce Growth Spawns Unwanted Side Effect: More Holiday Returns

As the 2015 holidays come to a close, retailers are tasked with handle their annual flow of product returns. The pickiness of consumers and the nature of gift-giving makes returns an inevitable part of the season, but retailers are now giving themselves more to handle as they continue to make purchases easier for their consumers.

Almost one quarter (24%) of consumers will return or exchange the gifts they received over the 2015 holiday season, according to a survey from mobile shopping app provider Retale. This percentage represents a slight increase over the 21% from the year prior that said they were likely to send back presents received. In total, the National Retail Federation expected returns this entire year to make up as much as 8% of sales.

The leap e-Commerce retailing took this holiday season — rising as much as 20% — suggests that the return rate will rise. One could forecast that the more remote purchases consumers make, the higher the chance the recipient would receive either the wrong product, or one they would prefer not to keep for personal reasons.

“The growth of the Internet is most certainly driving return rates up,” said Craig Johnson, President of Customer Growth Partners. “If you buy it online, you are by definition not trying it on.”

The Retale survey revealed three reasons consumers exchange and return holiday gifts:

  • 44% said they would return the item because they did not have a need for it;

  • 34% said the product was defective; and

  • 9% said they would rather have a store credit.

The e-Commerce explosion has enabled other factors to contribute to a heightened return rate, particularly the advent of free shipping. Free shipping, or cheaper shipping rates, incentivize the consumer to take more purchasing risks, knowing they won’t have to spend extra money if they return it.

The retailers offering this service take a massive hit here, as they don’t reap revenue that would make up for the cost of the return itself, including labor costs and processing fees. Additionally, with consumers now seeking out more alternatives for returns, retailers are being forced to adapt to consumer demands.

“Customers like the convenience of being able to return anything in-store,” said Pat Dermody, President of Retale. “While retailers advocate this multichannel experience, they are fast coming to understand that processing returns in-store, for purchases made online and with free-shipping, comes with an additional cost.  Whether they will ultimately be able to absorb the impact and continue to offer this convenience to multichannel shoppers, without charging them, remains to be seen.”

If anything, easy, no-hassle return policies show that retailers are focused on the long run. For once, the retailer is taking the initiative to bolster its relationship with the consumer, perhaps building more loyalty from a shopper that feels more power in the purchase process.

“Retailers have the difficult task of providing superior customer service by always giving the benefit of the doubt to their shoppers when it comes to returns, while simultaneously working to make sure they protect their business assets,” said Bob Moraca, VP of Loss Prevention at the NRF, in a statement.

Additionally, products such as jewelry, gift cards, clothing and apparel are all major returns categories, and as such, can be resold at a later time as long as they’re not damaged. While the retailer will likely have to offer a discount on some of these items, taking the immediate hit may be preferable to turning the customer off and potentially losing their business altogether.

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