The Deal with Returns

Anna Otieno, Head of Research, Strategy & Insights

Carli Gernot, Content Development Specialist

What’s Up

The ability to return an item — especially those products bought online — is one of the most important parts of e-commerce. According to a PowerReviews survey, in 2021 76% of shoppers said free returns was the top consideration factor when shopping online, second only to free delivery. Further, 72% said they return items purchased online about as often as they did pre-pandemic.

But, given the rise in e-commerce, retailers are facing losses at the hands of all these returns. National Retail Foundation’s Customer Returns in the Retail Industry 2021 report found that:

  • Total returns cost U.S. retailers over $761 billion in lost sales
  • For the average retailer, for every $1 billion sales, $166 million is lost in merchandise returns
  • For every $100 in returned merchandise that a retailer accepts, $10.30 is lost to return fraud

As a result, we’re seeing more retailers make changes to established “free returns” policy by charging for returns or shortening return windows in a bid to cut losses. Often these changes to return policies rolled out “quietly.”

  • In June, The Gap Inc. shortened the return window for Athleta, Gap, Banana Republic and Old Navy brands from 45 to 30 days. J.Crew’s return window shrank from 60 to 30 days.
  • Zara, J.Crew, JCPenney, Abercrombie & Fitch, Anthropologie, REI and LL Bean all began charging for mailed returns with fees ranging from $3.50 to $8.00.

What it Means

Inflation impacts all of us — consumers and businesses alike. Hidden costs for retailers could mean increased prices for shoppers and no one wants to see yet another reason for price increases. So, how can retailers navigate the tricky topic of consumer expectations not lining up with business needs around product returns?

Perhaps changing these return policies under wraps is exactly the opposite of how retailers should approach the issue of returns. This is a prime example of how overt transparency can be even more important for shoppers, especially as inflation-weary consumers are paying more attention to how much they’re spending this holiday season. Indeed, the 2022 Deloitte Holiday Retail Survey shows that 73% of shoppers expect higher prices this year due to inflation. Information around return windows — particularly if they’re different than last year or last month — is a key part of holiday shopping decisions since over a third of consumers (38%) say they plan to start shopping earlier than last year.

We’re seeing more brands and retailers boost transparency, making costs and purchase details more obvious to consumers. Airbnb recently changed how rental prices are displayed in order to clearly communicate the full price of a property (including that sneaky cleaning fee) while Saks Off 5th introduced a delivery visibility feature so customers can see the arrival date of purchase even before their order is shipped.

Tools that display delivery date, dashboards which clearly communicate fees, and e-commerce sites that offer transparent BNPL options will be more likely to win customer spending more often this holiday season. Instead of hiding behind changes that impact prices for shoppers, open up about why new policies are necessary. Customers are likely to appreciate the transparency and may be more willing to continue their relationship with brands they can trust.

About New Engen:

New Engen is a performance marketing agency helping brands find breakthroughs to unlock and accelerate growth. Born digital, tech-forward, and performance-driven, we lean on a data-driven, agile approach to marketing strategy and creative development to help brands outpace their competitors and stay ahead of the ever-evolving digital ecosystem. New Engen is based in Seattle with teams in New York, Los Angeles, and Charlotte.

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