Managing Excessive Returns: Strategies for E-Commerce Retailers

Returns continue to be a significant challenge for e-commerce retailers, with online return rates far exceeding those of brick-and-mortar stores. However, retailers must balance addressing return abuse with meeting customer expectations for flexible policies. Recent data highlights the scale of the issue:

• The average e-commerce return rate is 20%, compared to just 10% for brick-and-mortar stores.
• For every $1 billion in sales, retailers incur $145 million in merchandise returns.
• Return rates reached 15.4% during the 2023 holiday season but increased by a third in the post-holiday period.

Bracketing, the practice of buying multiple sizes or colors of the same item with the intent to return all but one, is quite common among online apparel shoppers. According to Statista, 48% of consumers bracket when sizing options are unclear. Bracketing contributes significantly to high return rates, inherently involving returning multiple items per purchase.

Many major retailers have begun taking action to curb excessive returns:

• Amazon assesses a returns processing fee for high-return rate products starting, excluding apparel and shoes.
• Some retailers are implementing flexible returns shipping charges or restocking fees that vary based on the reason for return.

• 42% of retailers surveyed have reduced the time window when consumers can return.
• Best Buy, for example, has a 15-day return period for most products (60 days for My Best Buy Plus and Total members), creating new incentives for consumers to join paid loyalty programs.

• 36% of retailers have made some items non-returnable (e.g., sale items).
• Best Buy charges restocking fees for product categories like activatable devices, drones, and cameras.

• Retailers like Nordstrom, J.C. Penney, and Best Buy are creating "return profiles" on customers to identify excessive returners
• Some use third-party services to create "return profiles" on customers and employ analytics and AI to optimize the returns process.

Return policies are still a conversion factor:

Retailers must tread carefully, as return policies strongly influence purchasing decisions:

• 82% of consumers say return policies impact their buying choices.
• 60% of online shoppers review return policies before making a first purchase.
• 80% of consumers are more likely to buy from retailers offering free returns

Rather than imposing overly strict policies that may reduce conversion rates, many retailers are exploring alternative solutions:

• They implement virtual fitting and styling tools to help customers make better choices.
• Offering "try before you buy" options, like Warby Parker's home try-on program.
• Providing detailed product descriptions, photos, and customer reviews.
• They are using data analytics to identify truly problematic return behavior.

While returns remain costly, experts argue that consumer-friendly policies generate customer growth, loyalty, and retention in the long run. As the e-commerce landscape evolves, finding the right balance between mitigating losses and meeting customer expectations will be crucial for retailers' success.