According to the National Retail Federation’s study, between $90 and $95 billion worth of holiday purchases were returned in 2017. Last year, about 11-13% of all purchases made were projected to be returned. This overwhelming amount of holiday purchase returns are becoming a serious problem for the retail industry. Further, the easy delivery options and return policies offered by most online stores is accelerating this problem. Sales isn’t the statistic that defines retail success any more. Returns and futile shipping costs have to be considered when calculating a retail store’s revenues and profits.
The root cause of massive returns during the holiday season
One of the major reasons why people don’t buy everything online yet is because of the risk associated with the purchase. Irrespective of how much technology has advanced, there’s still the possibility that an online purchase can result in a defective product or a product that doesn’t match your mental image of it. To eliminate this risk and encourage the fence-sitters to buy, e-commerce platforms and retail stores have introduced the no-risk-return option. Today’s consumers treat no-risk-return as a basic necessity for online shopping portals. Many consumers will refuse to buy from an online shopping platform if it doesn’t feature no-risk-return.
However, it’s this very feature (no-risk-return) that has created a new, massive problem for e-commerce platforms and retail stores. And it’s not just a problem for online retail stores. Brick and mortar stores also face the holiday return problem.
Have you noticed how all retail stores have discounts and offers during the holiday season? In fact, 95% of the retailers who participated in this study have claimed that discounts are one of the best ways to increase sales during the holiday reason. But, what’s the point if you ultimately don’t make profits?
It’s true that holiday discounts and offers drive-up sales numbers. People see discounted prices, and this increases their will to make a purchase. But discounted prices could also make people purchase more recklessly, disregarding needs and the intent to keep the purchases. This means that people could buy in bulk and then return items just as easily.
So, why are returns such a problem for retailers? Well, it’s because of the costs associated with the returns process. Last mile pickup and delivery costs, shipping costs and packaging costs heavily affect the retailers. This, in addition to lost sales, which are effectively nullified make holiday returns a serious problem for retailers.
Why increased volumes of holiday returns are a problem for the retail industry
To understand the extent of the problem that holiday returns cause, it’s important to compare the amount of sales and returns. If returns exceed sales, that could be a dire problem for your store. Even if returns equal sales, you have a serious problem that requires immediate attention.
Let’s consider the case of Kristina Nicoloas, who’s an ardent online shopper. Ms Nicolas claims that she receives 10-15 boxes every week, and returns about 30% of those purchases. That’s a serious amount of returns that you may want to pay attention to.
Further, the returns experience affects how your customers perceive your brand. If the experience is smooth, the customer will want to shop with you again. If the experience is bad, the customer may never want to return to your brand. Creating great customer experience will also cost you some money. Supply chain and operations costs also have to be considered when calculating the effect of holiday returns on your business.
In a way, it’s possible to reduce returns-associated costs by optimising delivery management. If you work with the right last mile connectivity service and choose the right logistics solution, you could minimise your holiday returns problem.