Retail Returns: both a challenge and an opportunity

A new report published by Appriss Retail and the National Retail Federation (NRF) raises the figure of returns in the United States for 2023 to $743 billion, accounting for 14.5% of the total annual sales figure.

This total volume of retail returns represents a decrease of $73 billion compared to the $816 billion from the previous year, a fact we discussed in another article last year following the publication of the 2022 report.

Out of this total volume of returns, online returns constitute 17.6% of online sales, while in-store returns related to in-store purchases are only 10.02%.

This reduction in the volume of retail returns, which could be considered a positive trend, includes, however, another not-so-positive figure: the percentage of returns considered fraudulent has increased from 10.4% in 2022 to 13.7% in 2023.

The importance of returns for shoppers

Historically, returns management has been an area where most retailers have invested little. However, the high impact of returns on shoppers’ purchase intent is well known.

According to research published by Statista (1), around 86% of global consumers stated that they sought retailers with simple product return policies when deciding where to make their purchases. Additionally, 81% said they would switch retailers if they had a bad experience with product returns.

What should retailers do to transform their returns management capabilities?

To achieve improvement in returns management, retailers must not only reduce the volume of returns and control fraud but also offer the best possible return experience to their customers.

In a recent study, Gartner highlights three fundamental elements for retailers to transform their returns management capabilities (2), confirming and expanding on some of the initiatives and strategies we discussed in our previous article.

Create a comprehensive governance and ownership structure

Retailers need a senior role, ideally reporting directly to the chief supply chain officer, tasked with improving return operations by establishing resources, processes, and KPIs. The organization should also shift its mindset to understand why consumers return their products and take preventive measures for return reasons that are within the control of the retailer. 

Models that reward net sales rather than gross sales, which do not reflect the impact of returns, can also facilitate this mindset shift.

Recognize the Importance of the consumer-facing aspect of the returns process

Retailers should make their return policies easily accessible and understandable to consumers as part of their shopping experience. They should also promptly address and appropriately respond to various reasons that customers may have for returning their purchases.

Strategies like applying charges for a return should be carefully analyzed to avoid further penalizing the return experience for buyers. This is particularly relevant for return reasons that are within the control of the retailer, as indicated in reports such as the “2021 State of the Industry Report: Retail Returns” by the company Incisiv (3).

Redesign supply chain operations and address the root causes of returns

Retailers must understand that returns management involves a set of processes distinct from standard sales. These processes should not be addressed only when there are available resources and time, as they should not be compromised by other activities.

Processes such as receiving and quality control of goods in stores and warehouses are crucial to determine the possibility of reselling those products to other customers, the need to return them to the supplier, or other types of action.

Ensuring the efficiency of returns management operations requires clear KPIs, generally related to the speed and accuracy of return processing.

Can the adoption of a unified commerce platform improve the efficiency of your retail returns operations?

Implementing a unified commerce platform streamlines retail operations, enhancing efficiency and customer satisfaction. With centralized data and seamless channel integration, retailers can minimize errors that may result in potential returns, such as in prices or product descriptions.

Unified commerce platforms enable a more agile and convenient returns process, with validations that help minimize potential fraud situations, reduce processing time and costs, and improve the overall returns experience.

Unified commerce platforms like the one offered by Orisha | Openbravo, recently recognized by Gartner in its 2024 Market Guide for Unified Commerce Platforms Anchored by POS for Tier 2 Retailers that you can access here.

References

(1)  Consumer Attitudes Towards Return Policy of Retailers and Its Influence on Their Purchasing Decision Worldwide 2020, Statista.

(2) How to Master Retail Returns Management, Tom Enright, 21 November 2023 (accessible for Gartner clients only).

(3) 2021 State of the Industry Report: Retail Returns. Incisiv