For e-commerce retailers, returns are even more of a headache than they are for brick and mortar sellers — and that’s why some stores are cracking down.
Return abuse has always been a widespread problem for retailers, but e-commerce sellers have traditionally offered generous return policies because of the tricky nature of internet shopping, where buyers have to make their purchase decisions based only on photos and descriptions. In particular, shopping online for clothing without being able to try it on can pose problems; but in spite of this, e-commerce accounts for almost 20 percent of the fashion retail sales in the US, and this number continues to rise.
Perhaps it’s not surprising that e-commerce return rates hover around 30 percent (some sources say 40 percent for some retailers), compared to 8.89 percent for brick-and-mortar stores. However, some retailers have had enough, and are citing shopper abuse as a reason to start banning serial returners.
Banned Shoppers, Closed Accounts
One example is Amazon, which has recently begun to ban shoppers who return too many items. Given Amazon’s reputation as a customer-friendly company that strives for personalized customer service, the move exemplifies just how much of a problem this has become for e-commerce retailers. Amazon has always been known for its generous return policies (which other companies have had to try to emulate, even when it wasn’t as cost-effective for them), but an Amazon spokesman recently told The Wall Street Journal that sometimes it’s necessary to take this sort of action in order to protect the rest of the company’s 300 million customers.
Within the last couple of years, e-commerce retailers such as Nordstrom have followed suit as well, closing accounts and banning shoppers suspected of abusive or fraudulent behavior. Return abuse has become such an epidemic, retailers such as J.C. Penney, Best Buy and Home Depot have begun tracking returns and creating “return profiles” on customers. In many cases, returns are monitored by a third-party company (such as The Retail Equation). In retail stores using these services, if a person is found to have made too many returns within a certain period, future returns will be prohibited until further notice. In the case of Amazon, returns are monitored internally, and if an algorithm picks up return activity that looks suspicious, the case is reviewed by an Amazon employee.
According to retailers, returns aren’t the only problem. Many of these “serial returners” are also sending back the wrong items or items that have been used and worn. Another problem is the abundance of items that weren’t purchased from the store, to begin with, but are fraudulently being “returned” for a refund. The numbers tell the story: According to statistics, return abuse or fraud costs US retailers as much as $17.6 billion in losses.
Treading a Fine Line: Protecting Retailers While Satisfying Customers
For e-commerce retailers considering a move back to stricter return policies, the public has spoken. Research shows that online shoppers vastly prefer buying from e-commerce retailers that offer a full refund with no limitations, as well as free return shipping. Likewise, recent studies show that 51 percent of shoppers say that they actually avoid retailers with strict return policies. This has become such an important issue for online shoppers, even digital marketing specialists know to emphasize hassle-free return policies when they produce ad copy for their retail clients.
In the meantime, instead of imposing stricter return policies, retailers are considering alternative ecommerce solutions, such as implementing new technologies to mitigate returns. These include virtual fitting and styling tools, as well as other ecommerce platforms to help shoppers make more-educated choices. Likewise, retail experts are advising shoppers who are worried about these bans to educate themselves by reading product descriptions, studying photos, comparing prices and reading reviews (especially negative ones) before purchasing a product.
As for the future, analysts say that while returns will continue to be costly for retailers, a generous, consumer-friendly return policy will balance these losses out by generating customer growth, loyalty and retention — three magic words to any ecommerce site.