Retailers paid an average of $10 per return even before the pandemic. With the expected upcoming surge in shipping volume, the cost of returns will only grow when many retailers are already struggling.

Kenneth Lim, senior vice president of client development at Optoro

For months, retailers and brands have been navigating uncertain and choppy waters. The pandemic has pushed ecommerce to new heights, potentially accelerating the shift away from brick-and-mortar by five years. The spike in demand for online shopping is overwhelming the retail industry’s capacity to meet make-or-break consumer expectations – such as inventory availability and on-time delivery.

With the holiday season approaching, the largest shipping carriers face operational challenges, including meeting heightened shipment volumes as well as expected delivery times. These challenges, inevitably, have led to delivery carriers confirming shipping surcharges for the holiday season.

Today, retailers are planning how to deal with shipping fee spikes during a holiday season that will likely be dominated by ecommerce. Some are planning sales as early as October to spread out shipping and rely less on Black Friday revenue.

Others are leveraging curbside pickup to encourage customers to shop online to pick up their items in-store. However, few are talking about the hidden financial threat holiday returns pose.

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Last year, consumers sent $100 billion in goods back to retailers between Thanksgiving and the end of January. Ecommerce drives up returns. Online purchases can have three times the return rate of brick-and-mortar purchases.

Holiday returns will add a tremendous amount of volume to already strained shipping carriers. They will pose challenges to retailers and brands as they struggle to keep costs down and delight customers during the most critical time of year.

Consumers like free return shipping

Today more than ever, consumers expect fast and flexible return policies, and flexible returns can be a competitive advantage for retailers. Even during the pandemic, nearly one in three people say a flexible return policy motivated them to make a purchase.

But free returns aren’t free. According to the USPS, retailers paid an average of $10 per return even before the pandemic. With the shipping surge and the growth of ecommerce, that cost will only grow when many retailers are already struggling.

We can expect to see more retailers charging for return shipping to offset this cost. But, retailers who choose to keep a free-return policy should lean into the offering to attract shoppers. In our 2019 consumer survey, we found that most consumers check return policies while shopping and 87% of consumers specifically rank free returns shipping as a top priority. On the flip side, retailers unable to provide free returns shipping must leverage exceptionally positive experiences to win customer loyalty even without this option.

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Make things easier for shoppers

This holiday season, retailers may face more online returns than ever before. While in-store returns tend to be the preferred method for consumers, a shift towards mailing in returns may be here to stay. According to our consumer research, nearly half of respondents said they would continue mailing returns in the future. Retailers should expand and improve return options for consumers via drop-off locations that offer a package-free, label-free process as well as an easy and safe in-store process.

Retailers—especially web-only merchants and those that don’t have an extensive network of stores—can use drop-off locations offered by carriers such as UPS, FedEx and USPS. Those locations provide customers more return options and help retailers consolidate shipping and save on delivery costs. These carriers have physical drop-off locations and drop boxes and partner with other retailers such as Michael’s to offer contactless drop-off returns. UPS Access Points also allow for label-free returns, which further simplifies returns for consumers.

Omnichannel retailers can leverage their ability to offer a buy online, return in store (BORIS) model by providing a safe and efficient system for shoppers in light of social distancing measures. For example, Walmart offers Mobile Express Returns within their retail stores that allow contactless returns for both ecommerce and brick-and-mortar purchases. Offering convenient contactless and drop-off returns experience plays a critical role in fostering customer loyalty.

Lean into returns experience to win loyalty

On the consumer side, returns will look different this year. People will likely compensate for anticipated delayed shipping times by starting their online shopping earlier than usual. While consumer returns behavior will be more unpredictable than usual, retailers can expect surges throughout the extended holiday season. In preparation, retailers need to ensure they can deliver positive returns experiences that drive customer loyalty and increase the likelihood of repurchases to mitigate the rising costs tied to returns and shipping.

Providing fast refunds or store credit will be paramount this holiday season to meet and exceed consumer demands. According to Accenture, today, 70% of customers expect refunds within six days compared to 13.4 days during the 2019 holiday season. Returns technology provider Returnly offers an Instant Credit service. They take on the risk for retailers to provide customers a credit refund and allow them to buy a new item immediately upon returning their item.

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With potential delays in shipping, retailers might not be process returns as quickly as in the past. Research from Returnly shows that Instant Credit can save up to three times the amount of sales compared to a traditional online return process. For this reason, retailers should look for ways to speed up the refund initiation process throughout the holiday shopping season.

Optoro is a returns technology company.

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