This post is by Sarra Turki, Senior Content Manager at Fulfillment Bridge.
Returns are a fact of life in the ecommerce industry. Almost 80% of customers check a retailer’s return policy before committing to a purchase. Merchants with a short return window or who charge restocking fees are avoided whenever possible.
Even though retailers are not required to accept returns by law (in the US), businesses almost always do. Refusing returns marks you out as a company who does not trust its customers. It’s simply bad for business.
But how many online orders are actually returned? What is the best time limit to offer for returns? Are free returns good or bad for business? Read on for answers to all those questions and more.
How many ecommerce orders get returned?
Ecommerce customer return rates vary widely, depending on the product category and order value.
However, research has consistently found much higher return rates for online shopping than in comparable brick-and-mortar stores. For example, the return rate for clothing bought online has been estimated at around 20%, while the rate for physical stores is less than half that. High-value items bought online can have return rates as high as 50%.
Why are online shoppers so much more likely to return their orders? A Statista survey of 1,000 UK consumers in July 2020 found that the main reasons were:
- Item did not fit (66%)
- Item was not as described (39%)
- Item looked different in person (36%)
Similar results were found in a GWI survey of US and UK shoppers.
Clearly, these are all problems that are easily addressed in physical stores where products can be seen, handled and tried on before buying. While online retail technology has progressed in providing a store-like experience, with better photography and virtual fitting rooms, the experience is still far removed from visiting a brick-and-mortar store.
Other reasons for higher returns online include delayed shipping, receiving damaged or defective products, and even receiving the wrong item entirely. All of these factors are within the power of the retailer to reduce to a minimum.
But there are other reasons for people returning items that are not so easily addressed. Some customers buy items online with the intention of returning them from the outset. There are several reasons for this including wardrobing, fitting rooming and outright fraud, which we will look at in more detail below, under “How many orders are placed with the intention of returning?”
How long should I give customers to return orders?
Online retailers have a relatively free choice to set their time limit for returns, as long as they comply with any minimum required by law. Most sellers give their customers between 14 days and 3 months to return an order, with 30 days being the most common. Some, however, offer a much longer return period – sometimes as a marketing gimmick.
The more difficult question is, what is the best time limit for ecommerce returns?
A short return window can be appealing for the retailer as it doesn’t leave the possibility of a return open for several months. An item that is returned 90 days after it was purchased might be impossible to resell, particularly if it is now an old product line or past its peak season. Or if the customer wants a replacement in a different size, you may no longer have stock and be forced to give a refund.
From the customer’s point of view, a short return window might discourage them from making a purchase if they feel that they won’t have enough time to properly inspect or try on the product. They might also think that you have deliberately chosen a short period so they run out of time and are forced into keeping the item. Clearly, this is not a good way to establish trust and get repeat purchases.
Longer return windows can actually increase conversions and decrease the return rate. They increase conversions because the customer is more confident that they will be able to return the item if they are not happy with their purchase.
But why would a longer return period decrease returns? Generally, it’s because customers don’t feel pressured to make a quick decision. With a short return period the safe option is to send the item back rather than take extra time to decide, and risk being too late. Customers might also forget to return a purchase with a long return window, because they put the decision off for so long that the time eventually runs out.
However, a long return period might also encourage customers to use the product repeatedly before deciding to return it. If the item is returned showing signs of use, you will not be able to resell it.
In summary, the best time limit for ecommerce returns depends on your products and customer base. Research your competitors to help determine what customers are used to seeing, and set your initial return window accordingly. Then you can consider experimenting with different time limits, and even restocking fees, to find the right balance between establishing trust and discouraging abuse.
Should I offer free returns?
According to a UPS survey (PDF), free return shipping is the most important factor contributing to a positive returns experience in ecommerce. Of consumers globally, 85% strongly feel that the retailer should pay for the return of an item that was wrong, poor-quality, didn’t match the description or arrived later than promised.
The benefits of offering free return shipping are clear: customers love it, expect it, and are more likely to shop with you again. But the downside is just as clear:
- It’s expensive.
- It can encourage return fraud.
If you sell a product category where free returns are increasingly the norm, like fashion, you will have to carefully weigh up the pros and cons. It will help you keep up with competitors, but might end up costing more than it brings in from additional sales.
One option is to have selective free returns. You can segment your policy depending on the product category, price point, and more. Free returns just for higher-value products with larger profit margins might make sense, but not for low value products that only have a dollar or two of profit in the first place.
What should I do when an order is returned?
Returns processing is labor-intensive, and therefore an expensive process. So much work is involved that some ecommerce businesses send most of their returns direct to liquidation companies for just a fraction of the retail price. It avoids them having to run their own returns operation with a limited payback for all the effort involved.
If you process returns yourself, there are several steps to work through to go from a customer asking to return a product to getting that product back on the warehouse shelves. Here’s how it typically works:
- The customer asks to return an order.
- You agree to the return and update your order management system, then provide the customer with a return slip and shipping label.
- The shipping company picks up the parcel and delivers it to your warehouse.
- Your staff check that the correct product has been received and verify its condition.
- You send the customer a refund or a replacement product.
- If the product can be resold, you return it to the correct shelf and update your inventory count.
There are additional steps you might add or ways to vary the process to meet your specific needs. For example, if you handle high-value items where return fraud can be very expensive, you might record a video of the parcels during opening so you have evidence of exactly what was returned.
You also have a range of options that you might consider for products that cannot be resold. These include refurbishing products to enable resale, selling in bulk to a liquidation company, or reselling on marketplaces like eBay.
Even products that cannot be sold anywhere need disposing of in some way, such as donation, recycling or incineration. See “What can I do with returned products that can’t be resold?” for more information on this.
It’s important to regularly evaluate your returns handling process and make improvements. You might find that the inspection process takes too long and needs to be streamlined to remain economical, for example.
If you use a third-party logistics company, they might offer a returns management service that can take the whole process off your hands.
How can I reduce my ecommerce returns?
Returns are a necessary evil in ecommerce. They keep customers happy but reverse a successful sale and cost you time and money. You are unlikely to ever reduce returns to zero, but there are many steps you can take to get them as low as possible. Here are some ideas:
Identify confusing or incomplete product descriptions.
Many returns occur because the customer bought a product that was not right for them. If the same product keeps getting returned because it did not meet customer expectations, there’s a strong chance that the product page needs work.
Ensure photos are large and clear and cover every important detail. Descriptions should include all the product specifications that customers are likely to be interested in such as size, material, color, weight, and more. Your product pages should not simply sell the item, they should also help redirect customers who would be better served by a different product.
Review your returns policy and process
Your returns policy plays a part in the return rate. The time limit for returns is a key aspect, as well as return shipping charges and restocking fees.
As mentioned above, counter-intuitive changes such as increasing the return window might actually reduce the return rate – but it depends on your specific product type and customer base. The only way to know for sure is to make a change for a few months and measure the impact. But avoid making too many changes as that might confuse regular customers.
You can also change the process when customers request a return. Routinely asking for a photo of a defective product, for example, might show that a customer is mistaken or give you the opportunity to offer a partial refund without them sending the product back.
Add customer reviews to product pages
Customer reviews are one of the most useful sources of information both for you and your customers. Shoppers will check reviews, and other sources of feedback like Q&A sections, to answer the questions they have about a product. This will help them make better purchases and be less likely to request a return.
For the retailer, review sections can highlight problem products or particular aspects of a product that could be improved, such as your guidance on the fit of clothing.
What can I do with returned products that can’t be resold?
It’s a frustrating fact of life that some returns will not be in good enough condition to go back on your warehouse shelves.
You have several options for returns that can’t be resold. Here are some options to consider:
- Let the customer keep the item. Clearly, you have to make this decision before the product is actually returned. For low-value items that are uneconomical to ship back this might be the best option. The main downside is that it can encourage return fraud.
- Repair or refurbishment. Some items might lend themselves well to repair, such as clothing, while others, such as electronics, require specialist knowledge and equipment. Repair is potentially the way to recover the most value from items. However, refurbished items are usually not sellable as new so you will need an alternative sales channel for them, such as a “bargain corner” or eBay, which has an official program for this.
- Sell on online marketplaces. You can also sell returned products directly on eBay or other online marketplaces, without repairing them, as long as you are clear about the condition and take photos of damage or other problems.
- Sell to a liquidation company. Many retailers dispose of customer returns and other unsellable items, such as overstocks, to specialist liquidation companies. These can take inventory off your hands in bulk but often pay just a few percent of the retail price so you will not recover a lot of value. The products will be sold on to discount stores, online sellers and others, and be sold to consumers again.
- Donation, recycling or disposal. Sometimes, it is not possible to recover any value from returned products. Unfortunately, you still have to put time – and possibly money – into disposing of items. Your options include donating to charities or other organizations (if they have a use for them), recycling or destruction. Donation or recycling could be a positive for your brand image, but beware of products making their way back onto sale in stores or online.
You might tailor your process to choose the most appropriate option for each and every return, or find it better to keep things simple and treat all unsellable ecommerce returns in the same way.
How many orders are placed with the intention of returning?
According to a study by the NRF and Appriss Retail (PDF), $102 billion of products were returned in 2020, amounting to 18.1% of total online sales. Of those, approximately 7.5% were fraudulent, with a value of $7.7 billion. For comparison, the in-store return rate is 9.4% and the in-store return fraud rate is 5.4%.
However, not all forms of purchasing with the intention of returning are fraud.
For example, people will buy multiple sizes or colors of clothing so they can try them on at home, then return the items that they don’t want for a refund. This can be inconvenient for merchants but as these are genuine shoppers, several major online retailers have introduced try-at-home programs to accommodate the practice, such as Amazon with Prime Wardrobe. The customer is given time to try on and return items before payment is taken.
Then there is the practice of “wardrobing”. This is where customers purchase a product to use for a short period of time and then return it. Clothing is the typical product type for this kind of return abuse, but it also extends to electronics, home appliances, and many other categories. While wardrobing is common and many consumers do not think of it as fraud, the returned products often have clear signs of use and cannot be resold. The NRF and Appriss survey found that 34% of retailers have experienced wardrobing.
Finally there are ecommerce purchases made with the intention of returning to obtain products or cash illegally. Sometimes stolen credit card details are used to buy products online which are then returned to a physical store for a refund. Other times returns are shipped back but the original product is substituted with a counterfeit, or the box is simply weighted so it can pass a cursory inspection. The NRF and Appriss survey says that 24% of retailers have experienced the return of goods that were purchased on fraudulent or stolen cards.
Return fraud can be reduced by tagging clothing in areas which are difficult to conceal, banning customers who make too many returns, introducing your own try-at-home program, properly inspecting returns and making video recordings of returned parcels being opened.
What is Amazon’s policy on marketplace returns?
If you sell on Amazon and your products are fulfilled via FBA, then Amazon handles customer support and returns without your input. Sellers need to monitor their account for returned products that are not fit for resale and ask Amazon to send them back or dispose of them. A new program being piloted adds liquidation options as well. Fees apply for FBA returns as well as removal orders and disposal.
If you sell on Amazon and fulfill orders yourself, then you will be responsible for handling customer returns. The policy here is clear: you must match or exceed Amazon’s own return policy, which gives customers 30 days to send most products back.
So, technically, sellers can set their own ecommerce returns policy, but in reality they have little flexibility in what it says. Not only that, Amazon does not give you a free choice over whether to accept each return, as it automatically authorizes most returns and provides prepaid shipping labels at your expense.
Amazon sellers are required to issue refunds within two business days, but that is also being automated so that refunds are automatically sent when the shipping carrier receives the parcel from the customer, with a system called Refund at First Scan (RFS). This also means you will not have an opportunity to inspect the returned order before the refund is sent.
If sellers do not provide a return address within the US, they have to provide a prepaid return label, or offer a full refund without asking for the item to be returned.
In summary, Amazon sellers must have a generous returns policy with fast approvals and refunds. This opens the door to abuse of the system as well as outright fraud. Sellers will have to argue their case with Amazon if they think a refund has been issued incorrectly, and should expect Amazon to side with the customer most of the time.
What are my options for handling international returns?
If you ship orders to customers across international borders, then managing returns from those customers can be very challenging. Customers want to return their order in a way that is fast and convenient, while retailers want to keep costs down. International shipping for single parcels is notoriously expensive, particularly for express services.
Here are a number of options to consider for international ecommerce returns.
- Provide a prepaid international shipping label. Global companies like FedEx, DHL, and UPS ship parcels almost anywhere worldwide. You can pay for shipping through one of these carriers, then email instructions to the customer so they can arrange a collection. This is fast, but expensive.
- Use a returns management service. International returns management companies can provide a local returns address for multiple countries. They receive returns on your behalf, inspect and grade them, then return them to you in bulk to reduce shipping costs. This is cheaper than shipping individual parcels and enables faster refunds.
- Use Amazon FBA. If you sell on Amazon, using FBA for international orders can be an efficient option for fulfillment, while also providing a returns processing service. You will have to ship inventory to Amazon’s warehouses in advance, and FBA fees can be expensive, but this is a convenient option both for you and your customers.
- Let the customer keep the product. For low-value products, you might consider refunding the customer without asking for a return. The customer will be satisfied and you won’t have the expense of international return shipping. If the cost of shipping exceeds the cost of the product, this can be a logical option.
Cross-border ecommerce has grown rapidly in recent years, and international logistics has some catching up to do. But there are options for handling returns that are worth exploring to find the right balance between customer satisfaction, speed and cost.
This post was by Sarra Turki, Senior Content Manager at Fulfillment Bridge, a leading global logistics and order fulfillment solutions provider.