Managing the Cost of Returns to Online Retailers

by | Mar 31, 2021 | Automation, Data Management, eCommerce, Retailers

What is the cost of returns to online retailers? In 2020 alone, nearly $50 billion in items were returned either back to the retailer’s return center, retail store or directly back to the retailer’s trading partner. An estimated 30 percent of all products ordered online are returned. That’s three to four times the return rate of products bought in store. 

Given that returns are inevitable, how can you avoid unnecessary return costs? And how can you make returns easier for yourself, your trading partners and your consumers?

Prevent returns with the right information

If you want to reduce return costs, it’s essential to understand the reasons driving returns for purchases made online. 

Common consumers return products include:

  • Product did not match description
  • Wrong size
  • Wrong color
  • Damaged
  • Defective
  • Or sometimes simply “did not like”  

Getting more detailed product data from your suppliers is one way to decrease the rate of returns. This involves collecting and sharing strong product attributes, details and pictures. For example, apparel retailers include attributes about fit, showing if an item is true to size or runs big/small to help consumers make a more informed decision.

With detailed product data, consumers can better understand your product before buying it. This way you reduce the likelihood of a return happening in the first place.

Reduce the rate of undeliverable packages

Did you know that 4 to 5 percent of packages mailed to U.S. consumers are undeliverable as addressed? Here are a few strategies to mitigate this issue.

  • Don’t deliver products to a P.O. box

Deliveries addressed to a P.O. box are likely to be rejected. To solve this problem, do not allow P.O. boxes to be included in a ship-to address for a direct-to-consumer order. (The only exceptions to this rule are using SmartPost from FedEx or SurePost from the USPS, both of which deliver to P.O. boxes).

  • Leverage order acknowledgments

Require suppliers to provide order acknowledgments for direct-to-consumer shipments. By doing so, the consumer will be notified of important delivery details. For example, the consumer can see when a package will be delivered and change delivery options if they won’t be home at that time.

  • Take steps to prevent theft

Another common customer claim similar to “products not delivered” is theft. Theft of packages delivered to consumer’s homes is on the rise. To prevent this, require a signature from consumers, shipment status information from carriers, or a photo as proof of delivery. 

Make returns easier with your trading partners

Finally, updating your return management policy with suppliers and automating the exchange of information about your returns process can remove some of the headaches.

Revisit the returns policy with your trading partners. This may include updating your supplier agreements to include “allowances” of invoices or a percentage of monthly/quarterly reimbursements between the two of you. Review certain products and determine if the time and cost of managing the return are worth it. For some products, it may be better to allow the consumer to keep the product and share the loss of the return. 

Without automation, you and your suppliers will spend valuable time on phone calls, emails and maybe even faxes with information about each return. Plus, you will have to input and manually track returns information in a database.

Data exchanges between buying organizations and their suppliers can streamline the process. Automating returns information and including information such as indicating “destroy in field” and return instructions not only saves time and money, but also improves the consumer experience by speeding up returns processing.  

Looking for expert advice on managing the cost of returns to online retailers? Talk to one of our supply chain experts.

Scott Bolduc


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