Consumers will spend the last few weeks of the holiday season stocking up on gifts and taking advantage of holiday sales and promotions to splurge on extra items for themselves and their families. However, some of those gifts and other purchases will inevitably end up as returns. In fact, last year, retailers estimated that 13.3 percent of their 2020 holiday sales would come back as returns, adding up to over $100 billion in returned merchandise.
“Returns are a moment of truth. Since your best shoppers typically make the most returns, they are a great touchpoint to build loyalty.”
Tom Rittman, vice president of marketing at Appriss Retail
With many of these returns occurring in January each year, it can be tempting to view returns as the costly price tag attached to the end of the holiday season. In reality, returns — and their impact on the retail industry — are much more nuanced. To address this, NRF’s research team looked at four common returns myths.
Myth 1: Returns are bad for business
It is simplistic to view returns only as a lost sale. Historically, they have also represented an opportunity for retailers to engage consumers. For example, in-store returns can be a vehicle to meet and convert an online buyer or to encourage shoppers to make an additional purchase. “Returns are a moment of truth,” says Tom Rittman, vice president of marketing at Appriss Retail. “Since your best shoppers typically make the most returns, they are a great touchpoint to build loyalty.”
Myth 2: The number of returns skyrockets as a result of online shopping
While it is true that many retailers show higher return rates for online purchases than those that occur in the store, like many issues related to returns, there is more to the story. According to NRF’s research, 69 percent of holiday shoppers prefer to return unwanted gifts or holiday items in the store.
As noted above, these store trips are an opportunity to build customer loyalty or encourage another purchase. Further, the growth of ecommerce does not automatically translate to an increase in returns across the industry. Last year during the height of the shutdowns, consumers turned to online channels for everyday and essential purchases. While some cautioned this could lead to a higher rate of returns once stores reopened, the majority (73%) of retailers NRF and Appriss Retail surveyed saw the same or fewer returns in summer 2020 compared with summer 2019.
In addition, there are proactive strategies retailers can take to reduce the impact of these online returns in the future. These include providing easy access to fit and sizing information and redirecting customers to options like buy online, pick up in store when they are clearly buying multiple sizes for fit issues.
“More than ever, customers are expecting a higher level of service at every point in the shopping journey.”
Caroline Turner, senior vice president of client development at Optoro
Myth 3: Returns have to be a hassle
There is a certain amount of inherent risk in returns, not only in terms of the cost of returning the item but also the relationship with customers. Research from Optoro found that 42 percent of consumers say a negative return experience led them to never shop with that retailer again. On the flip side, 97 percent were more likely to shop with a retailer again after a positive returns experience.
“More than ever, customers are expecting a higher level of service at every point in the shopping journey,” says Caroline Turner, senior vice president of client development at Optoro. “They are looking for fast fulfillment and convenience and flexibility in how they return items. Retailers that can provide a variety of customer-friendly returns options are more likely to convert returners into repeat customers.”
Innovations like online return portals have streamlined the returns experience, giving shoppers the autonomy to choose how their return is made, the type of refund they receive or even the option to exchange their item for something else. Another new service on the rise is the use of third-party drop-off locations which allow customers to bring unpackaged items to a local store or drop-off point, provide a QR code and be on their way. Some of these take the form of third-party providers like Happy Returns or the UPS Store 360 Returns Program while others are through partnerships with retailers, such as Amazon and Kohl’s.
Myth 4: Returns are just unwanted gifts or purchases
While it’s true that returns can result from customers changing their minds, the truth is returns are also a target for fraud, particularly during the holidays. In 2020, retailers estimated that an average of 10 percent of their holiday returns would be fraudulent, according to NRF and Appriss Retail’s annual report — significantly higher than the average of 6 percent they expected to be fraudulent for the entire year.
Examples of commonly experienced return fraud include return of shoplifted/stolen merchandise, employee return fraud and wardrobing (returns of used, non-defective merchandise). However, when implementing strategies to mitigate fraud, it is important not to alienate your best shoppers — those who often make the most returns.
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“Avoid putting procedures in place that impact all returners, like ‘no receipt, no return’ or return volume limits,” Rittman says. “Instead, take a more nuanced approach that considers the individual’s purchase and return history in order to avoid alienating your most valuable customers.”
As we approach January and returns begin to come in, it’s important to remember that returns — and their impact on retail — are a highly complex issue. Savvy retailers view returns as an opportunity for customer engagement while also taking steps to mitigate the costs and risks associated with returns.
Check back in January 2022 for NRF and Appriss Retail’s newest report on retail returns.