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E-commerce Returns Management Best Practices

Handling returns in the world of e-commerce is like walking a tightrope. Striking the balance between keeping costs in check and satisfying customers with hassle-free returns is a challenge that merchants face. Each return involves allocating operational resources for inspection, restocking, refurbishment, and even recycling or disposal if products can’t be resold.

In 2021, U.S. consumers returned a staggering $761 billion worth of merchandise across various retail and e-commerce merchants, as reported by the 2021 NRF and Appriss Retail Consumer Returns in the Retail Industry report. This influx of returns accounted for 16.6% of all U.S. in-store sales, up from the 10.6% recorded in 2020 during the peak of the pandemic lockdown.

Online purchases, on the other hand, saw a higher return rate in the past three years, with an average of approximately 20% of all D2C e-commerce sales being returned. Essentially, one in every five items purchased online was returned. These statistics highlight the growing significance of returns in the e-commerce landscape.

The complexity of reverse logistics, especially with the rise of omnichannel retail, makes efficient returns management essential. To achieve this, brands and retailers need to focus on mitigating fraud, improving performance measurement, and enhancing product marketing.

Combatting Fraud

Return fraud has become a growing concern in the e-commerce world. Last year, around $218 billion worth of online purchases were returned in the U.S., with $23.2 billion (10.6% of returns) classified as fraudulent. This translates to retailers losing over $10 to fraud for every $100 in returned merchandise accepted, up from $8.80 in 2019.

Common fraudulent activities include “wardrobing,” where items are used and then returned, return of stolen goods, employee fraud, and fraudulent returns using stolen credit card information. To combat this, retailers need to closely monitor sales and return patterns across various systems like e-commerce platforms and payment processing systems. Implementing fraud prevention software and data analytics tools can help identify suspicious activity and prevent losses.

Streamlining Processes and Monitoring Performance

Efficient e-commerce returns management involves refining processes related to restocking and performance measurement. With the complexity of omnichannel retail, decisions about who handles returns need to be clear, and rules for product disposition must be established. Routing guides, both for merchants and third-party logistics (3PL) partners, help ensure proper handling of returns and setting performance benchmarks.

Return cycle time, the time it takes to process e-commerce returns, is a key performance indicator (KPI) to monitor. A standard benchmark for this KPI is 72 hours. Retailers should aim for a performance rate of 95% or better in this aspect.

Enhancing Product Marketing and Descriptions

Improving product data and descriptions is crucial to reducing returns. Wrong sizes, fits, and colors, along with defective merchandise, are common reasons for returns. Comprehensive product detail pages (PDPs) with clear descriptions, dimensions, and customer reviews can significantly reduce return volumes. Customer reviews, in particular, play a vital role in influencing buying decisions and deterring returns.

For apparel, accurate sizing charts and measurement information are essential to prevent returns due to sizing issues. Additionally, providing visuals of products on various models can help customers gauge fit accurately. Advanced technologies like augmented reality (AR) are also proving effective in allowing customers to virtually sample products before purchasing, reducing the likelihood of returns.

Returns are an integral part of the e-commerce landscape. However, by following these best practices, brands and retailers can make informed decisions about their returns policies while simultaneously reducing return rates and combating fraud.

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