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ASCM Insights

Will Consumers Be Willing to Shoulder More Reverse-Logistics Costs?

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Alongside the rise of e-commerce shopping is the very predictable rise of e-commerce returns. To solve this problem, many companies are changing their policies — and in ways that are most definitely not delighting customers.

According to recent data, 20% or more of online retail purchases are returned, compared with a 9% return rate in brick-and-mortar stores. Because of the logistics and restocking involved, one study revealed that these returns cost online retailers 21% of order value on average. Another estimate puts this cost at 66% of the price of a product.

There are a variety of causes behind e-commerce returns: retailer, warehouse or shipping mistakes; picking errors; and ineffective sizing charts or product images. Plus, shipping damage, late shipments or missing a shipment altogether will result in unhappy customers for reasonable, albeit probably avoidable, reasons.

But the real crux of the matter is that the nature of e-commerce has led to unnecessary returns. For instance, e-commerce customers can’t try on clothes before they buy them, so some purchase multiple versions of the same item in different sizes or colors, then return what doesn’t work out. Omnichannel retailers accommodated this during the pandemic to keep people buying when they couldn’t visit physical stores and use dressing rooms. But the wasteful practice lingers.

On the other side of the issue is the problem of fraudulent returns. According to fraud-prevention company SEON, return fraud exists on a wide spectrum, ranging from honest mistakes to malicious, large-scale operations. Some examples include:

  • Wardrobing: Shoppers buy an item with the intention of using it once and returning it later.
  • Opportunistic: Consumers intentionally select the wrong reason for a return to protest or circumvent a policy. For instance, perhaps return shipping is free when a product is damaged, but not when it’s simply unappealing. So, the shopper selects damage as the reason for return, even though the item is in pristine condition.
  • Packaging switch: After purchasing two similar products, the shopper says they want to return the more expensive one — but then actually sends back the cheaper item in the more expensive product's packaging.

The Wall Street Journal reports that companies employ a variety of tactics to address these challenges. Back in June, Gap Inc.’s Athleta, Gap, Banana Republic and Old Navy brands shortened their return window from 45 to 30 days. Similarly, J.Crew halved its return window from 60 to 30 days. Abercrombie & Fitch, DSW, Kohl’s, L.L. Bean, Urban Outfitters and numerous others either charge a restocking or return fee or require the customer to pay for return shipping.

Other strategies have a more service-focused approach. Nordstrom is investing in better product imagery and descriptions for its website to help e-commerce shoppers make informed decisions. Amazon is bundling electronics with parts so consumers don’t accidentally buy the wrong cables or batteries, then need to return them. Ikea and online eyewear retailer Warby Parker are leveraging augmented reality so shoppers can see what furniture will look like in their homes or how frames will look on their faces.

Insights that return dividends

To help those struggling with the cost of returns and reverse logistics, we’ve just published an article to the ASCM Insights blog that offers clear strategies for improving returns management. Each week, a new article is launched in our blog, exploring supply chain best practices, the latest innovations, industry trends and much more. View the latest articles and check out some reader favorites at ascm.org/blog.

About the Author

Abe Eshkenazi, CSCP, CPA, CAE CEO, ASCM

Abe Eshkenazi is chief executive officer of the Association for Supply Chain Management (ASCM), the largest organization for supply chain and the global pacesetter of organizational transformation, talent development and supply chain innovation. During his tenure, ASCM has significantly expanded its services to corporations, individuals and communities. Its revenue has more than doubled, and the association successfully completed three mergers in response to both heightened industry awareness and the vast and ongoing global impact driven by supply chains. Previously, Eshkenazi was the managing director of the Operations Consulting Group of American Express Tax and Business Services. He may be contacted through ascm.org.

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