As the retail industry counts down the last days of its fiscal year (ending Jan. 31), the afterglow of an upbeat holiday season is being overshadowed again by the annual returns season, forecast at almost $750 billion, or 14.5% of total industry sales. Return logistics are a headache and have become such a staggering expense in the past few years that retailers industry-wide have been trimming liberal policies that were based on the theory of “lose money, keep the customer.”
Efforts to reduce returns by adding fees and limiting return windows may save money in the short run, but run the risk of alienating shoppers. More importantly, adding friction to the returns process ignores a significant threat to brand reputation and eclipses hidden marketing opportunities.
For starters, three out of four consumers in a First Insight survey last year said they would be deterred from shopping at a retailer that charges for returns. Loop, a returns logistics platform that Shopify has invested in, reported in 2022 that nearly six in 10 shoppers in a survey of 1,000 online customers said they would consider abandoning a brand over a poor post-purchase experience.
A more recent survey of 2,000 U.S. shoppers by SAP Emarsys, a cloud-based marketing platform, found that 88% of consumers “stopped shopping with a retailer when it introduced a paid returns policy.” The survey also found that 72% of consumers “show greater loyalty to retailers that offer free returns.”
The reasons customers give for returning purchases have less to do with phenomena like “wardrobing” (ordering a garment in multiple colors and sending back all but one) or capricious buying and more to do with basic issues that retailers can do something about, like fit and quality (ie. VALUE).
In other words, consumers deduce from returns policies how much a brand cares about them. When you consider that it costs much more to get a new customer than it does to handle a return, making the process seamless and free starts to look like a smart marketing tactic.
The marketing gold hidden in this dilemma is no great mystery. In 2015, researchers at the University of Texas-Dallas examined dozens of research papers that touched on purchase decisions and returns and concluded that lenient return policies produced more returns, but was also correlated with an increase in purchases.
The research also produced another counter-intuitive result: the longer the grace period for returning an item, the less likely shoppers are to return it. Ryan Freling, one of the researchers, told the Washington Post, “The longer a customer has a product in their hands, the more attached they feel to it. Since they don’t feel pressure to take it right back to the store, they kind of sit with it and live with it and say, ‘Well it’s not that bad.’”
So, who is winning the returns game?
According to a search for lists of best-in-class, retailers said to be getting it right include Walmart, Costco, Nordstrom, Zappos, Home Depot, and Ikea are a select few.
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