Profitable & Sustainable Ecommerce Return Solutions for This Holiday Season
By Lauren Mathews
While generous retail return policies help drive sales, brands are seeing a phenomenal volume of merchandise flowing back to their warehouses each year. Shoppers returned about $428 billion worth of purchases to U.S. retailers in 2020, and the impact wasn’t just financial: an estimated 5 billion pounds of goods also ended up in a landfill.
The holiday season is especially challenging for retailers, as shoppers spend generously on gifts they hope will spark joy. Once presents are unwrapped, however, an average of $158 billion of merchandise, equivalent to 18% of holiday sales, is typically returned, according to National Retail Federation (NRF) data.
Numerous factors are at play when it comes to the high volume of returns. Online shopping is convenient, but products may not meet expectations once shoppers have the goods in their hands.
As noted by McKinsey, brands also lack effective reverse logistics for processing and reselling returns at scale, and there’s little coordination between business functions or ownership of the returns process.
As a result, brands are losing significant revenue and creating massive amounts of waste.
Environmental Impact of Free Returns
Shoppers expect free shipping and returns, taking advantage of a risk-free experience and buying more than they need. It’s easy to add a variety of styles and sizes of apparel to a cart and send back what doesn’t fit, a common practice known as bracketing.
Most shoppers are unaware of what happens to returned clothes. They assume items are put back on the shelf for others to purchase.
The reality is, without the right infrastructure in place, it’s often more economical for companies to dispose of merchandise than to go through the labor-intensive process of manually evaluating items and determining whether they can be restocked.
New and secondhand clothing is frequently shipped to locations such as West Africa and Chile, where it ends up in overflowing dumps.
Discarded clothing is quickly becoming a long-term concern for the planet, especially when made with synthetic materials that don’t biodegrade and polluting chemicals.
Even premium brands such as Coach, Burberry, and Nike have made headlines for destroying new, usable goods instead of finding ways to put them back on the market.
Free returns for shoppers take a huge toll on our environment. As more of these news stories surface, shocked shoppers are taking note of how brand practices affect the planet.
According to a study by ReBound, 57% of shoppers check a retailer’s sustainability policy before making a purchase.
Another 71% understand that free returns are a luxury that comes at a financial cost, and are willing to pay more for sustainable return options.
Financial Impact of Free Returns
What is the financial impact on a company when a customer returns a product for a refund?
The NRF reports that for every $1 billion of retail sales, an average of $106 million of merchandise, or 10.6% of sales, comes back in the form of a return.
Furthermore, according to Optoro data, only 20% of returns are defective.
Returns come with a hefty price tag for businesses beyond the initial lost revenue. Optoro estimates that brands can spend $33 to process the return of a $50 item or two-thirds of the cost.
Companies must pay numerous expenses, such as the cost of return shipping and transporting items to processing centers or warehouses.
Additional staff is needed to examine items and determine whether they can be resold. In addition, delays in customers returning items to retailers can cause goods to lose value, especially near the end of a season.
Returned items may end up being significantly marked down or liquidated, or become excess inventory that must be recycled or disposed of.
The industry is reaching a point where more profitable and sustainable ecommerce returns solutions are needed.
In the following few sections, we’ll look at how businesses can meet shopper expectations and deliver stellar service while maximizing opportunities to recapture revenue from returns.
Strategies for Handling Ecommerce Returns
Returned merchandise causes a financial headache for brands, but when you manage the process efficiently from the shopper’s point of view, you can inspire customer satisfaction and loyalty. At the minimum, customers want:
- A lengthy return window. It’s in a brand’s best interest to recover items quickly in an effort to get products back on the shelf, but 63% of shoppers expect to have up to 30 days to consider a product and return it, according to a ReBound Returns survey.
- A timely refund. Once shoppers decide they no longer want a product, they are focused on getting a refund as quickly as possible. ReBound also found that one-quarter of shoppers feel a delay in getting their money back is poor customer service and creates a negative overall returns experience.
It’s worth it in the long run, however, to make ecommerce returns smooth and effortless for shoppers. Research shows that nine out of 10 customers will purchase from you again if the returns process has been easy.
Offer In-Store Returns
Brands with physical storefronts have the ability to offer in-store returns for goods purchased online. This can help drive sales for the 62% of shoppers who say they’re more likely to purchase online if they can return an item locally.
Customers can receive money back as soon as they hand over the item, rather than risk the item getting lost in the mail or a processing error at the warehouse. Some shoppers may also want to see what other products or sizes are available for immediate replacement.
In-store returns also make sense from a business perspective. Staff can collect merchandise and return it to the warehouse in a bulk shipment, which costs less than individual shipping and cuts down on carbon emissions. This type of returns solution also streamlines workflow for staff receiving the returns in the warehouse.
Turn Returns Into Exchanges
Brands can leverage returns into exchanges when assisting shoppers in person. You may need to train customer service teams to better understand how products are related, but it may be possible to capture some or all of the amount of the original sale if you can pinpoint alternate products that satisfy shopper needs.
Staff often begin the returns process by asking if something is wrong with a product, but questions can be phrased to discover why products didn’t meet expectations. You’ll find customers tend to be brief in their responses, but staff can dig a little deeper to learn why an item is being returned and recommend solutions tailored to a customer’s needs. It’s an excellent opportunity to cross-sell or upsell products that are in store.
Even if a customer chooses to proceed with a refund, the data gathered can help product designers and buyers understand why customers are dissatisfied. If expectations aren’t being met, you may need to help shoppers make a more informed decision before they add items to their carts.
This may take the form of detailed sizing charts, additional product photographs, in-depth descriptions, videos that offer a 360-degree view of the product, or feedback and reviews from other customers about fit.
Leverage Returns to Supply Branded Resale
Perhaps the most impactful way for brands to divert merchandise from landfills and generate revenue is to offer returned products for sale. By adopting a resale channel, brands can sell new and pre-worn merchandise to customers using a white-label, branded resale platform. This ecommerce returns solution reduces waste and extends the life of your products.
According to Just Style, the resale clothing market is only going to expand in the coming years. Motivated by sustainability concerns, as well as their own pocketbooks, budget-conscious shoppers are finding the brands they love to wear on resale platforms.
The clothing resale market was expected to notch 31% growth in 2022, and expand by another 52% during the three-year span from 2023 to 2026.
Patagonia and REI are examples of stores that sell returned items. Their resale inventory also includes gently worn gear that customers bring into retail stores or send in by mail. In exchange, shoppers receive credits that can be used in person or online for new and used apparel.
These resale programs have been hugely successful in capturing revenue for goods that would otherwise have gone to third-party resale channels or the landfill. On average, 80% of Patagonia’s WornWear online inventory sells in one week. In 2021 alone, REI sold more than 1 million preloved items.
Launch Your Branded Resale Channel with Trove
Launching a new branded channel may seem daunting, but it doesn’t have to be with Trove. Patagonia and REI power their resale programs through Trove. Trove helps design, create and execute branded resale programs, providing back-end technology and assuming much of the end-to-end, behind-the-scenes work.
Reverse logistics are one of the biggest challenges for brands managing inventory returns, but Trove streamlines the process of moving goods back from the customer. This includes inspecting returns to ensure they meet your brand’s standards for resale. Once items are accepted, Trove uses data from your catalogs to create product listings. High-quality product photos are taken in line with your brand, and prices are set using algorithms to maximize profitability. Trove can fulfill orders or you can manage the resale program in your facilities using Trove technology and item IDs.
The dedicated brand site keeps customers within your ecosystem, delivering a seamless experience. Trade-in credits are quickly issued and redeemed using Trove’s apps. The resale program can also be connected with loyalty rewards and gift cards. Trove collects valuable analytics throughout the entire journey, providing you with insight into site engagement and customer behavior. You can use this data to further inform your marketing strategies.
Transform your returns into profit with Trove’s end-to-end branded resale platform. Chat with us today!