For those acquainted with social media, “try-on hauls” are likely a familiar encounter. This is a trend where viewers are often asked to comment whether featured items should be kept or returned.
Try-on hauls are also a demonstration of the “bracketing” phenomenon. It looks cool, sure, but not everyone contemplates the logistics (and reverse logistics) involved in the keeping and returning. Certainly not the serial returners.
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Retailers bear the brunt of bracketing
Bracketing surged in popularity during the pandemic, when online shoppers found a convenient alternative to in-store trial rooms through at-home try-outs.
It goes like this — customers purchase multiple colours and sizes of the same items, try them at home, and subsequently return, in bulk, the items that don’t quite make the cut.
However, the convenience offered to customers in the form of free returns comes at a cost for retailers — averaging at £20 per parcel, accounting for shipping, warehousing, and repackaging.
To put that in perspective, figures show that more than 60% of online shoppers engage in the practice of bracketing their purchases. For retailers, this could mean quite a sizable slice taken out of their profits, depending on their margins. That, and the logistical labyrinth.
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By GlobalDataBesides the financial strain, retailers are also faced with several other challenges. For starters, think about how bracketing disrupts inventory management. Artificial SKU shortages make it extremely challenging for retailers to maintain accurate replenishments in real time, as they have no way of knowing which sizes or colours will ultimately be returned.
Dealing with bracketing in large volumes, their returns management capabilities are also challenged. Any delay in processing returns could echo throughout subsequent processes, extending to longer waiting periods for customers anticipating their refund. Clearly, that’s not a good look for any business aspiring to offer great post-purchase experiences and build brand loyalty.
On top of this, the looming threat of return fraud cannot be overlooked. Recent research shows that 48% of consumers in the UK have acknowledged purchasing, using, and subsequently returning an item in the last six months.
Adding to the trouble, retailers are also confronted with the issue of tactics such as returning counterfeit items.
A rulebook refresh: How about paid returns?
While a free returns policy sweetens the deal for online shoppers, change is stirring. Leading retailers, including Zara and H&M, are now charging customers for online returns, and many other retailers are following suit. Sendcloud’s findings reveal that 4 out of 5 fashion retailers are now charging for returns.
It’s true that free returns have played a crucial role in getting customers comfortable with the idea of online shopping during its initial years.
Today, when new challenges arise, there is a need to accommodate positive customer experiences within an arrangement that doesn’t compromise on profitability and sustainability. That is to say, it’s high time for retailers to critically re-evaluate their returns policy.
Can the introduction of a return fee really lead to more accountable consumer choices and, consequently, fewer returns?
Consider the case of Wehkamp, a Dutch online retailer, before and after they introduced a return fee. Prior to introducing a new returns policy, around 50,000 items were returned at Wehkamp every day.
Cut to the present, a symbolic return rate of 50 cents per item helped the company bring the return rates down by 10%. Annually, this spares them a whopping 1.5 million returned items, as customers order fewer different sizes or colours. That’s a hefty bunch!
Influencing a behavioural change in this regard is also important from an environmental perspective. In addition to contributing to carbon emissions through return logistics, a significant environmental concern arises from the fate of returned products— many of which end up in landfills, as many retailers opt to dispose of over one-fourth of their returns. Items deemed unsuitable for resale become part of the troubling cycle, piling on to the staggering 5 billion pounds of discarded material annually from returns.
Now, how much are consumers willing to pay for returns? According to Sendcloud’s findings, customers in the UK are willing to pay up to £4.70 for returning a purchase worth 15 euros, £5.10 for something worth 50 euros, and £6.80 for something valued at 150 euros.
As the numbers convey, people don’t mind shelling out some cash when they want to return a product. Well, that’s reassuring.
Finding the middle ground
There are a number of ways in which businesses can grow their businesses without offering free returns as an obligation and compromising their margins.
For instance, many retailers offer various benefits, including free returns for consumers who pay a certain fee for membership. Examples include Zalando’s Plus service and Amazon’s Prime membership. This approach allows businesses to maintain profitability while providing added value to their loyal customers.
Retailers will also find great value in returns data, the reviewing of which will offer important insights that could help minimise returns proactively. Managing an extensive product range with hundreds of items makes it challenging to identify faulty items in the assortment.
Analysing return data allows retailers to instantly understand which products are returned most frequently and why. (Is it the fit? Is it a quality concern? Or is it an unmet expectation?) This way, retailers can prevent repeating the same mistakes again and again.
When revising return policies, retailers must carefully assess their long term impact on sales, ensuring that the benefits not only outweigh any negative effects but also tip the scales in favour of sustained customer satisfaction and overall profitability.
There should be a keen awareness of what the customer expects, what they are accustomed to and how their purchase behaviour might shift in response to changes in return policies.
Think long-term
At the end of the day, it’s about striking that delicate balance, discouraging thoughtless purchase behaviour that takes a free returns policy for granted, without disregarding genuine cases of customer dissatisfaction. After all, if unhappy customers don’t return their products, they are unlikely to buy from an online store again.
It’s human nature to think twice when there is a price tag attached to something, contrary to something that’s offered for free.
While enabling retailers to offset significant return costs, a return fee also acts as a check on the customers’ return behaviour, encouraging a more responsible approach to online shopping.
About the author: Rob van den Heuvel is Co-founder & CEO at Sendcloud, a shipping platform for e-commerce.
