An expensive business: The survey also highlights how costly returns are for merchants: For every $1 billion in sales, retailers see $166 million in returns, on average. On top of that, for every $100 of returned merchandise, they lose $10.30 to fraud.
- Processing a return can be more expensive than it’s worth: Online returns can cost $10 to $20 to process, not including the cost of freight, which means retailers can end up losing money.
- In certain scenarios, Amazon, Walmart, and other retailers will simply write off the item by giving the buyer a refund and allowing them to keep the product.
A growing problem: As the rate of returns increases, retailers are struggling to decide what to do with unwanted items. While the most obvious solution is to put them back into circulation, the process of reverse logistics (moving goods from the consumer back to the retailer or manufacturer) is complex and expensive—not to mention that some returned items are not fit to be resold.
- Certain items, such as underwear or beauty products, are destroyed for hygienic reasons, even if they weren’t used.
- Even if items are in good condition, some consumers take so long to return them that they effectively become dead inventory, notes Suzy Davidkhanian, eMarketer principal analyst at Insider Intelligence. The longer it takes a customer to return an item, the more likely it is to be out of season when the retailer receives it, thus preventing its resale and making inventory planning more difficult.
- The environmental impact of returns is difficult to calculate, especially given the lack of transparency around most retailers’ return policies. With sustainability becoming an increasingly important consideration for consumers, retailers will have to reconfigure their reverse logistics processes to be more eco-friendly.