How Free Returns Affect Retailers

"In 2022, returns cost retailers about $816 billion in lost sales. That’s nearly as much as the U.S. spent on public schools and almost twice the cost of returns in 2020. The return process, with transportation and packaging, also generated about 24 million metric tons of planet-warming carbon dioxide emissions in 2022. "Returns are often free for the consumer. But managing those returns can get costly for retailers, so much so that many returned items are simply thrown out. "Returns start with miles of transportation to get items to retailers' warehouses dedicated to processing returns. This step of the process costs the retailer money – 66% of the cost of a $50 item by one estimate – and emits carbon dioxide as trucks and planes carry items hundreds of miles. The plastic, paper or cardboard from the return package becomes waste. Processing a return takes two to three times longer than initially shipping the item – it has to be unpacked, inspected, repacked and rerouted. That is a manual process, requiring hiring employees in a tight labor market. "Although in-store returns can significantly cut warehouse and transportation costs, only about a quarter of online purchases are returned in person to the store. "If the item is defective  the warehouse worker might flag it to be sent out for fixing and refurbishing. It would be repackaged and loaded on a truck and possibly a plane to get to the repair location, leading to more carbon dioxide emissions. "When it is more expensive to restock or refurbish a product, it may be cheaper for the retailer to dispose of the item. Some are sold in bulk to discount stores. Often, however,  returned products simply end up in landfills, sometimes overseas. In 2019, about 5 billion pounds of waste from returns were sent to landfills, according to an estimate by the return technology platform Optoro. By 2022, the estimated waste had nearly doubled to about 9.5 billion pounds. [2023 data not yet available, but the upward trend has probably continued.] "Era of free returns might not last. The percentage of retailers charging to ship returns increased from 33% to 41% in 2022. Retailers are also trying several other techniques to lower the return rate: shortened the return window, limited frequented returns or stopped offering free returns. Other strategies include virtual dressing rooms and clearer fitting guides, which can help reduce clothing returns, as can high-quality photos and videos that reflect size and color accurately. Above excerpts from June 2023 article by Simone Peinkofer,  Assistant Professor of Supply Chain Management, Michigan State University. https://lnkd.in/eakHVPHS

Last year I had a call with the VP of ecommerce of a $300M+ retail company who was convinced their 32% return rate was "just the cost of doing business" When I dug into their data I discovered that almost half of post-purchase revenue loss is preventable. This happens all the time, retailers are pouring their heart and budget into hitting sales targets, only to watch a third of that revenue disappear due to inefficiencies and refunds. It's demoralizing to be a retailer these days. It doesn't have to be this way! Here's the playbook we used to help that company recover over $6.8M in just 4 months: Most retailers focus on the wrong metrics, for example they celebrate $10M in sales while silently losing $3.2M to returns, and another $1M to operational inefficiency, plus $800K to return fraud and abuse. Quick observations: Your "best customers" are killing you! 37% of "VIP shoppers" are serial returners, they look great in your CRM but they're negative margin customers. We found one customer returning over $14K → this is totally preventable! This is our framework that we developed after working with hundreds of enterprise retailers in the past 5 years: Prevent returns Enable size/style swaps and allow for uneven exchanges (more expensive or cheaper options) Store credit options instead of refund Relevant product recommendations for exchange and upsell Analyze the return reasons by product - this can save you a lot of products from being returned! Results: Over 60% reduction in refunds b) Prevent fraud and abuse Fraud rules to prevent return abuse Automate policy enforcement and verification of product quality before the product is sent back Product inspection workflows at the warehouse level Results: the highest we seen last year for a customer was over 90% c) Streamline Operations Setup rules for returns routing to the closest warehouse or outlet stores Minimize clicks and enable a scan, scan, refund workflow Centralize all returns data and actions into one system, to prevent system switching Results: 42% faster processing Returns are not a cost of doing business. They're a goldmine of hidden opportunities. But here's the truth: Most retailers will read this and do nothing. They'll keep losing millions because "that's just ecommerce." The smart ones will see this as the competitive advantage it is. What side do you want to be on? P.S. If you're a retail executive seeing 20%+ return rates, DM me. I'll share our full framework as it’s way more detailed.

65% of customers buy more often from brands with easy return processes, according to data from Forrester. However, most retailers running on legacy OMS platforms simply can’t deliver the returns experience customers expect. Not even close. This is because most of these systems don’t even support the basics: return tracking, case numbers, and automated packing slips—which are the exact features Forrester linked to higher purchase frequency, and without them, customers hesitate to buy again. When shoppers can’t tell if their return was received or when their refund is coming, it creates doubt. That doubt delays (or completely deters) the next purchase. At Pipe17, we’ve seen how integrating returns directly into order operations changes everything. Support teams don’t have to jump between systems. Connecting these disparate systems, gives support teams full visibility into return status, refund progress, and shipment updates in one place. They can in turn leverage this to simplify the return process. Retailers that treat returns as part of their order operations, rather than a separate process, tend to see stronger repeat business. Because when return workflows are connected, customers don’t need to think twice before ordering with confidence.

What I wish more people knew about returns? Most shoppers don’t realize it—but that “free return” they just made? It likely cost the brand up to 60% of the original product’s value. Some brands throw the item away. Others pay to ship it across the country—twice. And many resell it at a loss, or not at all. The retail return crisis is a $800B problem in the U.S. alone. Fashion is one of the hardest hit categories. - High return rates (20–40%) - Lost revenue - Excess shipping and handling - Waste and environmental impact Returns aren’t just a logistics problem—they’re a profitability and sustainability crisis. But there is a way to solve it, without compromising on shopper experience. Save your margins + build loyalty! How? A customer-centric returns process. #hatereturns