Returns in retail are unavoidable, and the explosive growth of ecommerce and retailers offering options like buy online, return in store means customers are returning more product than ever. Considering the impact on profit, that’s a big concern.
However, savvy retailers are bringing more attention to the process, turning potential loss into opportunities to improve customer satisfaction, advance sustainability efforts and limit fraudulent returns.
Learn more about returns in the retail industry and how they are changing over time.
Returns account for $816 billion in lost sales across the U.S. retail marketplace, according to the 2022 Consumer Returns in the Retail Industry report, conducted by the National Retail Federation and sponsored by Appriss Retail.
As a percentage to sales, year-over-year rates remained flat at roughly 17% in 2022 and 2021, but up from nearly 11% in 2020. Online return rates decreased over the past two years from 21% to 17%, falling in line with overall return rates.
A couple of key events might explain the rise since 2020, and the subsequent stabilizing over the past two years.
The COVID-19 pandemic forced many retailers to quickly implement or advance ecommerce platforms that included BORIS and buy online, pick up in store capabilities. Moving quickly into these channels could have caused some challenges with an increase in returns, potentially leading to the spike from 2020 to 2021. Although still high, with online and in-store return rates in line and stable year over year, retailers appear to have refined their omnichannel processes.
Another factor might be an increase in return fraud. Retailers identified higher percentages of returning stolen goods; returning goods purchased online with stolen tender; and employee return fraud and collusion. Accounting for $84 billion of the overall amount lost, these events correlate to the industry’s increase in retail theft and cyber and digital-enabled online fraud.
Check out the highlights from the NRF PROTECT loss prevention and cyber risk conference and take a look at the 2023 event recap.
But returns should not be viewed as a total loss. A shift in mindset can present opportunities to decrease return rates and loss by leveraging data, increasing communication with manufacturers and thinking about sustainability.
Collecting and analyzing return data is a first step. Determining why a customer returns a product can allow for changes to reduce future returns. That data should be shared with manufacturers to support a collaborative approach to improving overall customer satisfaction and reducing future returns.
Companies are also paying attention to how returns impact environmental and sustainability efforts. A recent NRF study on the carbon footprint of retail operations identified retail returns as a significant factor. “This is yet another example where the financial incentives to the business (reducing returns) also generate environmental benefits,” says Scot Case, NRF’s vice president for sustainability. “With some sustainability-focused consumers, reminding them that their choices have environmental impacts might help those consumers be more selective when making purchases and less likely to return products.”
Learn more about how sustainability in retail is evolving.
Retailers are looking at product resale, an emerging trend that is part of the broader “circular economy” and is redefining retail returns. Consumers benefit from lower prices, while retailers see additional profits and attract new consumers that might not otherwise shop with them.
It also creates environmental benefits by avoiding the emissions needed to create new products. “It’s a way to turn returns into profit and environmental benefits,” Case says.
Policies and procedures are a third area where retailers are taking a hard look to reduce overall returns.
When it comes to preventing fraudulent returns, returning stolen goods and even wardrobing (the returning of used, undamaged merchandise), creating and holding to stricter return policies are at the crux of the battle against fraudulent returns. Limiting one’s ability to convert stolen or wardrobed goods to tangible currency, including store credit, can have a positive impact on returns.
Recent conversations with asset protection leaders indicate that some are leaning toward stricter return policies. Some retailers are enforcing credit/no cash without receipt or exchange only after a shorter grace period.
Returns will always be a part of retail. It’s what happens after the return occurs that determines their impact across an organization.
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