Why charging for product returns puts a greater focus on getting the sale right in the first place

Alison Wiltshire

01 Dec 2022

Product returns are the post-sale headache that neither customers nor retailers want. Reducing them is on a retailer’s wishlist whatever time of the year, but especially during the holiday season when volumes can skyrocket.

For retailers, the cost of productreturns has always been high. There’s the resource spent on handling and processing returns; the potential loss in the value of stock – particularly seasonal – as it’s on its way back to your warehouse or distribution center and the cost of a lost sale and potentially future custom if your customer doesn’t buy an alternative.

Previously the only cost to customers was inconvenience and disappointment. Now product returns come with another price to pay, especially in the fashion industry where returns can be highest. We are seeing retailers increasingly abandon free returns as part of a revamp of policies that are also seeing shorter return windows.

The revamp of policies is desperately needed to reduce returns rates and boost sales. In a recent survey of US retailers, 91% of respondents said that returns grew faster than revenue last year. According to the National Retail Federation, retailers expect around 18% of stock sold during the 2022 holiday shopping season to be returned.

For 2021 overall the return rate was around 16.6% of total US retail sales – a total of $761 billion. That costs retailers a total of $166 million in merchandise returns for every $1 billion in sales according to the NRF, and has led to the likes of Gap, Banana Republic and J Crew shortening returns policies and others including Anthropologie and LL Bean charging for mailed returns, the latter charging $6.50 per package.

Although introduced in the fashion sector, where returns rates are the highest, this trend of charging for online product returns is something we are likely to see more of as retailers seek to make customers think twice about their returns habits. The 2022 holiday season may well prove to be the litmus test for whether more brands begin charging for online returns in 2023.

It’s an issue retailers can’t afford to ignore. Although returns to stores generally remain free – since staff have a greater chance of upselling when the customer is in store – the greater cost comes from the impact on customer satisfaction. In the US the number of large retailers charging for returns has risen from 31% to 40% over the last year, yet 79% of US consumers say that free returns is important to them, second only to free shipping.

By not meeting this expectation of free product returns retailers risk losing customers for good, which means that it’s vital to get the sale right first time, especially when buyers may not be quite so sure of their purchases. Social proof messaging from Taggstar helps do this in several ways. It can highlight bestsellers and popular items, inspiring customers to buy by showing what others like them are buying. 

This can help gift buyers narrow down choice in categories that they might not be so knowledgeable about, as well as highlight trending products.

Alternatively, by incorporating review information into your social proof messaging strategy you can help consumers understand how what they are buying is rated by other customers or whether it’s true to fit.

By adding social proof messaging to your product recommendations with social proof recommendations you can also help the gift buyer who really doesn’t have a clue. Such recommendations allow of-the-moment product discoveries that are related to market trends – ensuring the products your customers discover are more relevant to them and their gift Recipients.

With this greater assistance, as well as social proof messaging linked to low stock messages, you can also prevent the most dreaded of shopping phenomena – particularly when it comes to gift-buying -– the panic buy. Low stock social proof messaging will let customers know the real-time scarcity of a product allowing them to snap up must-have items before they disappear for good.

Product returns have traditionally been an accepted cost of online retail. Now for the sake of your profits, sustainability goals and general customer satisfaction, it’s more important than ever to reduce returns rates. 

Helping your customers to buy right first time is one of the most effective ways of reducing returns rates and their associated costs to your business without having to introduce a returns fee for online customers.

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