Turning a $761 Billion Retail Headache Into an Opportunity to Grow Revenue

Narvar’s two latest research reports go deep into the issue of online returns — the positives and negatives — and why retailers and brands can make it a pleasant experience on the customer shopping journey.

The reports, which include the 39-page “The State of Returns: The End of One-Size-Fits-All Returns,” and the 26-page “2022 Returns Policy Benchmark Report,” both underpin the growing importance and costly nature of returns.

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In the state of returns report, the authors note that the value of all the merchandise returned to retailers last year totaled $761 billion, which reflected a 78 percent increase as compared to 2020. Although this seems like a headache for retailers and consumers, it doesn’t have to be.

“While returns are something no retailer looks forward to, their impact does not need to be negative,” the authors of the report said. “Examined through the right lens, returns provide retailers with an opportunity to reconnect with customers, cultivate their trust, and cement their loyalty (which leads to greater lifetime value). Furthermore, returns do not need to be the last touch on the customer journey. If the returns experience is constructed in the right way — for example, offering instant refunds in the form of store credit — returns are just a conduit to the next sale.”

Narvar said building a returns experience that strengthens a retailer’s revenue stream “isn’t easy, but it isn’t impossible either. With a little vision, a lot of commitment, and an exceptional technology partner at your side, you can pull it off.”

Looking ahead, the researchers said 2023 will likely see retailers evolving how they deal with returns. “Specifically, investment in frictionless returns will increase,” the report stated. “Brands will expand their capacity for flexible return options and institute more lenient returns policies as a means of attracting larger order values and greater lifetime value.”

The report also included consumer insights. “For the sixth year in a row, ‘fit and size’ remain the number-one reason for all returns,” the report noted. “In 2022, fit and size accounted for 45 percent of returns, up from 42 percent in 2021 and 38 percent in 2020 — an indication that retailers are still missing the mark in the customer experience, despite investments in augmented reality and other size or fit technologies.”

In the benchmark report, Narvar presented some key trends and notable takeaways from its research, such as not being afraid to charge for returns. “Estimates suggest that the average cost of a return totals as much as 30 percent of the original purchase price,” the authors of the report said. “Yet, according to the research conducted for this report, at least 59 percent of retailers charge no return shipping or restocking fee. The fear? That by charging a fee, they’ll lose out on business.”

Narvar said the truth, however, is that free returns “may not be as important to locking in sales as you think — the modern shopper is accustomed to paying for convenience. In a world where consumers are willing to spend $8 to get a $6 burrito delivered to their door, retailers…shouldn’t be shy about asking customers to foot the bill for a convenient returns experience.”

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