How can retailers leverage costly ecommerce returns into a sales tool? It’s an interesting question that has emerged as retailers wrestle with an avalanche of ecommerce return expenses in 2020.
According to the National Retail Federation, consumers returned an estimated $428 billion in GMV to retailers last year, approximately 10.6% of total U.S. retail sales in 2020. The NRF survey found that for every $1 billion in sales, the average retailer incurs $106 million in merchandise returns.
Due to the inefficient nature of reverse logistics, processing, and restocking, ecommerce returns are costly and impact the bottom line. Some retailers have changed the return process into a positive, customer loyalty campaign. Other tech-savvy companies are taking the returns experience to the next level with AI and computer vision.
Here is a look at the building blocks that have enabled retailers to turn a negative experience into a positive opportunity for additional sales.
L.L. Bean: The Pacesetter Pulls Back
L.L. Bean has had the most liberal return policy of any retailer. It did not matter how old an item was; if someone wanted to return it, it was processed, no questions asked. This returns philosophy helped make the brand one of the most notable activewear lifestyle retailers.
In February 2018 L.L. Bean’s lifetime returns policy was cut to 12 months. The company noted it had lost $250 million over the last five years, as “abusive” returns under the policy had doubled to 15%. At this same time, Amazon had a 30-day return policy but was diligently working on its own process to make returning merchandise even easier.
Amazon Once Again Raises the Bar
In December 2019, Amazon announced it was expanding its label-free and box-free returns. The ecommerce titan was helped in this regard by its network of more than 5,800 locations and partnerships with other retailers. What made this new return process a success was the company’s back-end technology that allowed 18,000-plus drop-off locations in the U.S., including Kohl’s, select Whole Foods Markets and UPS stores.
Amazon’s technology trumped L.L. Bean’s goodwill return initiative. Leveraging the world’s most renowned logistics chain, Amazon was now enabling customers to show a QR code at pickup/drop-off locations or use a barcode to place items in a locker at any Amazon Hub site in 900+ U.S cities. Technology was reassuring customers if they did not want an online purchase, it was easy to return it. In the year of the pandemic, logistics technology would prove to be the ultimate retail panacea.
Walmart Fires Back
Walmart retooled its logistics chain and found a more streamlined solution. On Dec. 21, 2020, a year after Amazon’s announcement, Walmart said customers could schedule a free pickup of a returned item through a partnership with FedEx.
Walmart also gave customers near-instant credit on returns, as soon as the next day, and same day for store returns.
Technology has replaced the goodwill approach of ensuring customers are in full control of their purchases, from online browsing to ecommerce returns. At first glance, it would seem only the largest retailers have the means to produce these hassle-free returns experiences. But game-changing tech is now accessible to retailers of any size.
Return Tech Trickles Down
Providing the same hassle-free return experience can be done by any retailer. It starts with a platform where the physical goods can be held in a secure fashion. Just like the big guys, these platforms allow shoppers frictionless ecommerce fulfillment by scanning a QR code.
A smart-shelving unit enables quick and easy store returns of ecommerce purchases, without waiting in line. They also enable shoppers to make an exchange in store for their ecommerce return, with the new item staged and ready for pickup.
Future releases could allow shoppers to determine what they want to keep in a move to circumvent the closed fitting rooms. These platforms could also receive returns from any participating retailer at a collection point, helping them establish a physical presence to decrease shipping and returns costs.
Reverse Logistics: The New Sales Tools
Retailers have always used sales promotions to attract shoppers but smartphones mean the best price is just a click away. The only new retailer advantage left is to offer them a seamless, convenient return drop-off experience. Companies that ignore this will find themselves at a competitive disadvantage.
As always, technology helps level the playing field. So much so that complicated aspects of Artificial Intelligence (AI) and computer-aided vision are now masked and can be installed at any retail location in a day. Powerful but easy to manage, it’s creating new loyalty by empowering customers to take command of the full purchase cycle – not just at Amazon or Walmart, but at any mom-and-pop store or SMB seller. Ecommerce returns are indeed the last untapped area for retailers to elevate their shopper services.
Mo Cheema is the Director of Solutions Design and Implementation at Position Imaging