Struggling with Return Costs: A Perspective on Online Retailing
Online retailers are grappling with the high cost of returns, despite their best efforts to decrease them. A study conducted by the retail research institute EHI found that the average cost for each returned item ranges from five to ten euros. This expense is even higher in the home and furnishings sector, at 10 to 20 euros due to their size and value .
The Price of Returns
Assessing returns is the main cost driver for retailers, with 70% of respondents mentioning it as the primary reason for returns' high expense. Other factors affecting the total cost include the shipping, handling, and restocking of the item .
Variations in Return Rates Across Industries
The volume of returns varies greatly across industries. For instance, fashion products have alarmingly high return rates, averaging 26 to 50%. This is often due to customers ordering multiple variants to find the perfect fit or color. However, the item-related returns rate remains relatively stable, averaging between six and ten percent .
Countermeasures and Strategies
To combat the high cost of returns, retailers are employing various strategies. These include recording return reasons (70% of retailers), providing detailed product descriptions and user-generated content (86% of retailers suggest this as an essential measure), offering store credit or refunds, and analyzing return data to identify and address potential issues .
Furthermore, many retailers cover the shipping costs for returns to increase customer satisfaction, with 66% of online retailers offering this service . Some retailers even charge returns fees to customers with high return rates if they fail to meet a certain threshold of purchased items .
Incorporating AI-driven analytics and automation, personalizing pricing and promotions, and creating a clear and straightforward returns policy are some other effective strategies to reduce return costs. Implementing these measures helps retailers enhance the customer experience, increase accuracy, and improve efficiency in dealing with returns .
Concerns and Impact on the Environment
High return rates also have environmental implications. Pollution, waste, and increased CO2 emissions due to return shipments for consumer goods are significant concerns for postal services . Therefore, it's crucial for online retailers to implement strategies that reduce the environmental impact of their returns process.
Conclusion
High return costs present a significant challenge for online retailers, impacting their bottom line and the environment. By understanding the factors contributing to returns and implementing effective countermeasures, retailers can mitigate these issues and create a successful online shopping experience for their customers.
Footnotes
1. EHI Retail Institute. (2023). [Studee zur Rückverfolgbarkeit von Online-Waren.] Retrieved from
