Two-Way Commerce: The New Age of Merchandise Returns
Current conditions as they are, many ecommerce vendors have a slate of struggles that weren’t present when they first went into the business. The upending of reality as we knew it, kicked off in early 2020 by the presence of a global pandemic, has resonated in countless areas of the economy, of individuals’ consuming behavior, and various functions of operating as a merchant in general.
While it has always been essential to establish and maintain a sound refund policy, it is now mired in complications brought about by residual obstacles directly related to that pandemic. The epic rise in online purchasing has its downside: consumers not accustomed to buying sight-unseen may experience more dissatisfaction and wish to send merchandise back.
For ecommerce sellers, returns present a unique problem. They are expensive, time-consuming, and often they create inventory imbalances. Large sellers adjust far better than small players, but even they have a burden to bear. Returns in every case are a necessary evil of selling online, as nearly 20 percent of all purchases made in 2020 were sent back for a refund. Not all merchandise may be resold, and all returned goods require inspection for suitability as an item labeled “new.”
Also at play are issues of wildly increased shipping rates —working both ways between the original sale and the decision to compensate consumers for the cost of sending items back—and it appears there is no remedy on the horizon. If you currently offer free shipping, this is not a news bulletin.
On the flip side, not offering a workable return policy will impact sales. Web Retailer reports that ecommerce vendors whose customer base is made up of at least 40 percent of repeat buyers realize about 50 percent more sales. This is an intuitive example of consumer behavior, and if buyers know they may easily return and/or exchange merchandise seamlessly, they are far more likely to become regulars.
By the Numbers
We’ll rip off the Band-aid with a number that may be shocking. Ecommerce returns for the holiday season of 2020, the first of the official pandemic era, reached $101 billion. That includes costs associated with processing returns. Notably this reflects a consumption pattern that was new to a good number of buyers, so it should not be interpreted as a repeating phenomenon.
Overall, returns represent 15 to 20 percent of all transactions among ecommerce operations. It may climb higher, but count on a reasonably consistent one-in-five products finding their way back to you. Clearly larger and heavier items hurt the most with respect to cost, thanks to the disproportionate hike in shipping bulky and weighty items. You should be already tracking your return rate, but breaking that down into categories of merchandise, including size and unique shipping costs, is important.
If you don’t offer free shipping on returns, your business could suffer. Experts gauge a negative attitude among potential customers who have to choose between a seller that grants free shipping and those that don’t. This is where you must do a critical evaluation of the ability to absorb the cost of liberal refund policies. Will it reduce your profitability to an unsustainable level and make doing business a moot point? Or will you explore options for shoring up the general sales strategies that can reduce returns in the first place.
Keep in mind that though presenting yourself as a hassle-free, generous seller with easy return policies may increase business, it may also trap you into a situation where shoppers overuse the benefit and take advantage. Hopefully these will be statistically insignificant. That said, taking a see-how-it-goes approach by experimenting with changing policies may paint you in a negative light among consumers who value consistency.
You may be aware that local and state laws require merchants to refund damaged and defective merchandise, so keeping that in mind is a critical element in considering how returns factor in to your policy. For a forward-thinking primer on how to start on a sound, workable refund policy, visit BigCommerce. Being pro-active and prepared could just save your business.