Retailers Optimize Return Policies As Ecommerce Continues To Thrive

In the early days of the pandemic, many businesses navigating store closings and community safety adapted refund and return policies to meet the changing needs of consumers. The rise of ecommerce, in particular the massive uptick in ecommerce holiday shopping, has led some big box retailers to skip returns altogether, telling consumers to keep their unwanted items. The return policy change is driven by the cost of processing returns and the limited ability during COVID-19 for shoppers to bring items back to stores. 

Using Machine Learning, Big Box Stores Tell Consumers To Keep Their Returns

In order to determine the best way to handle a return, retailers are turning to machine learning and artificial intelligence to assess whether it’s worth it financially to physically accept and process a return. According to an article by Suzanne Kapner and Paul Ziobro in The Wall Street Journal, “For inexpensive items or large ones that would incur hefty shipping fees, it is often cheaper to refund the purchase price and let customers keep the products.” Narvar, a platform that processes returns for companies, is seeing significantly increased interest in the “keep it” return policy, and expects to see the policy roll out more over the next year. 

Return Volume Increases With The Rise Of Ecommerce

Order a lot online, return a lot online. According to Narvar data, ecommerce returns were up 70% in 2020 compared to the year prior. “Ecommerce returns this season [the 2020 holiday season] could total as much as $70.5 billion, a 73% increase from the previous five-year average. This increase can be attributed to a historic rise in ecommerce sales triggered by the COVID-19 pandemic,” according to CBRE, an American commercial real estate services and investment firm. UPS and FedEx both reported higher volume of returns than prior years.

Ahead of the 2020 holiday season, CBRE noted that the reverse logistics of last year’s increased return volume on the already groaning supply chain would require retailers to physically and financially prepare for an onslaught while implementing digital retail strategies to mitigate some of the need for returns. As the pandemic continues, and ecommerce keeps scaling as a preferred method of shopping, innovating to manage returns is still essential. “Retailers will have to meet this growing challenge in many ways,” said John Morris, industrial & logistics and retail leader for CBRE. “More space will be required for distribution networks. However, cutting down on the overall return rate should be a paramount goal going forward. Technologies such as virtual sizing and augmented reality (AR) can help provide more accurate product assessments, allowing consumers to make more informed decisions and reduce returns. Innovations like this will help retailers limit their losses and cut product waste — a win-win for everyone.”

Retailers, Including Walmart & Target, Innovate To Handle Returns

For products that can’t be restocked or resold, or for when the cost of facilitating returns is considerable, a growing list of retailers, including Target, are telling customers to take the refund and either donate or keep the unwanted product. For when the “keep it” policy is not possible or desirable, many retailers are working with partners, including shipping and fulfillment companies like FedEx, to reduce the costs of returns. According to the The Wall Street Journal, “Delivery firms are working with retailers to help them reduce costs by providing scannable codes that consumers can bring to retailers such as Walgreens or UPS stores that accept the returns.” Adding, “Walmart is allowing shoppers who purchase items online to schedule a time for FedEx to pick them [the returned products] up.” Having customers complete returns inside stores can be significantly cheaper for retailers able to avoid return delivery costs. In-store traffic from returns can be beneficial in other ways, since customers returning items in-store will often shop around and buy other items. 

The rise of ecommerce has led to new consumer expectations that include easy online shopping, fast delivery and simple returns. Retailers that want to keep customers satisfied need to stay agile when it comes to processing returns, particularly since return experiences are part of what shapes how customers feel about businesses overall level of service. 

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