How can retailers avert a holiday returns catastrophe?

Photo: UPS
Nov 20, 2020
Matthew Stern

Holiday returns can strain retailers in the best of times. Thanks to the still-raging novel coronavirus pandemic, retailers are facing down what promises to be an unprecedentedly e-commerce-heavy holiday season, and experts are predicting that the returns situation could be even tougher.

In a BrainTrust Live session on LinkedIn discussing the challenges retailers face this holiday season, both Shelley Kohan, associate professor at Fashion Institute of Technology, and RetailWire contributing editor Patricia Waldron, founder of Vision First, pointed to significant returns problems that retailers are likely to face come January.

“When we talk about reverse logistics, when we talk about all the merchandise coming back if we think about just being able to get the products back in stock once they’re there, they’ve missed their prime selling season, how’s that going to impact the margins?” said Ms. Kohan. “And also looking at having all this merchandise come back, now that adds to your book inventory.”

“I’m wondering if sending things out free on e-commerce and taking returns with free shipping, if we’ll ever even get to black this year for some retailers,” said Ms. Waldron.

Retailers have been working to address the latter concern by establishing more options for returning merchandise other than the mail, as CNBC reports. A few third-party returns processors are teaming with brands to open pop-up kiosks specifically for product returns in shopping malls and at retail locations like Walgreens and FedEx.

Mall owner Simon Property Group is setting up its concierge desk at six major malls to receive returns from 12 big-name retail brands, including Levi’s, Gap, Vera Bradley and Dockers. The brands will direct customers to a nearby mall via their online return forms to encourage a physical return rather than a more costly shipped return.

While free return shipping may be rough on retailers, it remains a customer expectation, with 34 percent of consumers reporting lack of free returns shipping as a top reason for cart abandonment, according to new research from FedEx.

“No one has figured out reverse logistics in terms of returns for the digital business,” said Ms. Kohan.

DISCUSSION QUESTIONS: Do you see retailers being able to effectively push customers to managing returns in person rather than via return shipping? How might retailers mitigate other costs that come with an influx of holiday returns?

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"The best way for retailers to mitigate the cost of returns is to address why customers are returning the goods directly."

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18 Comments on "How can retailers avert a holiday returns catastrophe?"

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David Naumann
David Naumann
Marketing Strategy Lead - Retail, Travel & Distribution, Verizon
5 months 15 days ago

The cost of returns is a big issue for retail and it goes beyond shipping costs. The labor to process returns and inspect products and the logistics of getting the product to the right place to sell the product while protecting margins is a huge challenge. Optimizing the returns process is critical to maintaining profitability of online transactions. Encouraging customers to return products in the store helps and some retailers may offer incentives such as a one-day discount on incremental purchases in the store.

Richard Hernandez

How will this work during the pandemic? There are some stores that are still not accepting returns – will this be drawn out for the next six months? There are big costs attached to processing returns (there always has been) but I would like to see how this will be managed during the pandemic.

Raj B. Shroff

In order to push shoppers to doing returns in person there has to be something in it for the shopper otherwise they’ll choose the most convenient option. And if that happens to be shipping, that’s what they’ll do. The pop-up and other aggregated returns are great ideas to attempt to curtail an onslaught.

I would think retailers could incentivize shoppers to return at store, hoping shoppers will end up buying other things while there – foot traffic is valuable. Perhaps others will get more creative and try to stage returns over set periods of days or weeks through incentives to manage traffic flow. E.g. Return your item this Thursday for [promotion on toys,] Friday for [promotion on electronics.] Get creative, find the opportunity to try something and see what works.

Dave Bruno

Just as we saw many retailers quickly pivot to offer curbside pickup, I think we need to see the same effort put into offering curbside returns. Offering the option to return online and drop off in-store (RODIS?) at curbside would make the curbside transaction efficient and offer socially distanced shoppers a safe option to return the merchandise and get their money more quickly than they would via return shipping.

Cathy Hotka

I’ve been saying for many years that unpredictable sizing is a major problem here, and it has never been addressed. What, exactly, is a women’s size “small?” A “small” at a teen retailer will bear no similarity to a “small” at Talbots. Until customers can be confident in what they’re purchasing, we’ll have margin-sapping problems with returns.

Gene Detroyer

I hear this from my wife all the time.

Jeff Sward

Managing returns is best handled as part of the original sale. In too many cases, returns are encouraged, so there isn’t much room for retailers to now complain about a very clear, known cause and effect. Free shipping and free returns are very expensive competitive tools, customer acquisition cost or market share grab — whatever term you want to use. And trying to encourage in-store or in-mall returns during the dead of winter during a pandemic might be a very tall order. Smart selling might be a more profitable path than encouraging open ended returns. Victoria’s Secret recently rethought some product and pricing strategies and they seem to have worked remarkably well. Returns are a problem, but they are also a symptom of an even larger problem.

Di Di Chan
The best way for retailers to mitigate the cost of returns is to address why customers are returning the goods directly. For example, in the fashion industry, one of the biggest reasons for online return is a mismatched expectation when it comes to fitting or style. Retail technology can help solve these problems. Adidas, Macy’s, and Modcloth are testing out virtual fitting rooms to improve fit using Zeekit’s technology. Sozie solves the online fitting issue by offering on-demand user and employee-generated content of fashion try on. A simple way to reduce mismatched expectation of an item’s quality is to improve the photo details. Zoomlook’s technology enables retailers to convert their existing still images into detailed VR “easily zoomed-in” pictures so shoppers can experience looking at product details the way they would naturally examine a fabric detail they are curious about in person. Once retailers get to the point of returns, a popular alternative is to enable shoppers to instead resell items through the circular economy. Levi’s and Gucci are leading a less wasteful and more… Read more »
Lisa Goller

This year’s e-commerce surge means more products will boomerang back in January.

A buy online return in store (BORIS) policy saves retailers shipping costs but it’s a hassle for consumers. Also, pandemic health concerns may make consumers reluctant to visit malls to return merchandise.

Since returns are inevitable, retailers can let consumers start the returns process on their website or app to minimize the amount of time they spend in-store. Offering fast, easy returns at a post office, FedEx or UPS store can also protect customer satisfaction.

To reduce returns, retailers can prioritize their assortment’s bestsellers and drop items that tend to come back. Managing consumer expectations with detailed product data like dimensions can help consumers know exactly what they’re buying.

Gene Detroyer

The readers know I am a fan of online shopping. I am a bigger fan of online returns.

While I understand why the retailer likes in-store returns, I don’t understand why a customer would choose that option.

Handling returns is going to be difficult. But the retailers have “been there, done that” for years. Yes, often with little success. However they know what is coming and if they aren’t prepared, it is their fault. They can wish and hope that the customers behave in a certain way, but all the wishing and hoping won’t change the results.

Steve Montgomery

There are many non-shipping costs associated with returns. The shipping cost is one that can be reduced but not truly eliminated. The creation of locations that handle returns from multiple retailers as Simon is doing in malls is a great way to help reduce this cost. It has one specialized function – handling returns. This helps ensure a smoother process for the customers which will go a long way to make the process less of a negative for the brand.

Mohamed Amer

Each retailer has to discover and address their Pareto chart of causes. I suspect fit, color and texture would be near the top of the list. Being able to visualize the product in one’s environment helps. In addition to clear product images, posting user or brand-generated content, such as videos, with accurate measurements and sizing tools can further reduce the returns rate. To mitigate the cost of free returns shipments, provide a tangible incentive (non-trivial) to visit the store or mall. That is where your deep understanding of each customer comes into play – personalization covers the entire shopping journey, including post-purchase.

Ralph Jacobson

This is not a one-size-fits-all challenge. When looking at reasons for returns, apparel is one of the riskiest for retailers as ordering/sizing is a major source of returns. Those retailers need to look at their commerce sites and minimize the need for customer returns as much as possible by looking at the shopper journey and eliminating weak points in the experience. Other product categories can be analyzed in similar fashion by improving steps in the shopping process to minimize opportunity for order errors.

Ryan Mathews

I think some retailers may take a cue from Amazon. The other day I received a package mis-delivered to my address. I called Amazon to tell them about it and was told – much to my surprise, “Just open it. If it’s something you can use, keep it. If not donate it or throw it out.” But what about the person it was intended for? I asked. “No problem,” I was told. “When they contact us to tell us they are missing a shipment we’ll just send them another one.” Their “logic” being that sending out say a new television set or whatever was cheaper than handling the return or, apparently, having somebody drop by and deliver it to the right address. BTW, I ended up delivering it myself. Retail chains like Victoria’s Secret routinely destroy returns at the store level and have for years. Why? Again, it’s cheaper.

Natalie Walkley

There will be a lot of lessons learned in January 2021. But if retailers enable customer-initiated returns, they could have the opportunity to incentivize a return to store option (i.e. 10 percent off your in-store purchase). However given the pandemic, many e-commerce orders may be purchased as gifts, and therefore there may/may not be a store nearby the recipient. Perhaps offering “warehouse sales” in January (non-returnable) would be a good way to clean out some returned inventory and recoup some of the losses.

Peter Charness

For apparel, where people order multiple sizes to find the one that fits, and multiple products to find the one they like … there’s not much to be done this holiday season. The best a retailer can do is engineer for speed of return, in particular speed of putting salable returned products back on the shelf as soon as possible. Having inventory unavailable for sale for a long time period is a problem that can be somewhat fixed this season.

As to the economics of online selling and return management — it’s eventually going to have to be buried in the cost of goods sold/margin. Shoppers don’t want to explicitly pay for shipping or returns, so they are going to have to pay for it elsewhere. There is no such business capability called “long-term free.”

Doug Garnett

We need be very concerned about the costs being built into the online selling model — getting a product hand delivered to your home is a premium NOT a discount service. Yes. This could be financial catastrophe for many.

As to handling the returns, let’s add some different realities. First, there will be plenty of customers who would have returned in a typical season who don’t return this year. Shipping back is enough of a pain that it often doesn’t happen. (I should know — I have two shirts for return in the back of my car that have been there for weeks.)

The more concerning problem is that whatever level of returns happen will be compressed into a short timeframe. Returns from 2.5 months of shopping all coming back in 2-3 weeks? Retailers need to be staffed and structured to expect a very high volume — even if the percentage of returned product is lower than normal.

Shep Hyken

It’s all math. A good retailer should be able to forecast sales and returns with some accuracy. They should also educate the customer on the convenience of their return policies; in person, shipped back, etc.

"The best way for retailers to mitigate the cost of returns is to address why customers are returning the goods directly."

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