Returns Should Not Be Just a Business Cost: Report

returns process

Despite all the attention paid to skyrocketing returns, most retailers in 2022 still treat them as simply the cost of doing business instead of as a strategic focus area and opportunity for a stepped-up customer experience, and the numbers of a new report bear out that approach.

The report from Apriss Retail and Incisiv, “Returns As An Engagement Strategy,” found more than two-thirds of retailers surveyed (69%) said they treat returns as a cost center, while the same number said they lacked a good understanding of the root cause of returns.

Significantly, 91% of retailers surveyed said their return rate was growing faster than sales, and only 18% said they have a strategic end-to-end returns management program in place.

In the big picture, the returns problem is growing. According to research by the National Retail Federation, returns accounted for $761 billion worth of goods sold in 2021, representing about 16.6% of all retail sales in the U.S. During peak holiday season, that number edged up to about 17.5%.

Nathan Smith, SVP of products, Apriss Retail, said there are a variety of reasons why so many retailers are not making their returns process more strategic. These include competing priorities like the rocky macroeconomic environment, upheaval due to the pandemic, shifts in buying behavior and wildly fluctuating inventory levels.

“Returns can feel like a second-class citizen,” Smith said. “There is no chief returns officer responsible for the end-to-end flow, because it’s split between different silos in the company and no one person owning it.”

He said many companies focus on the nuts-and-bolts of tackling reverse logistics, moving a growing volume of boxes back upstream in the supply chain without asking hard questions about why they’re there in the first place.

“Before looking to reduce the cost of the movement of returns, and how to disposition them for resale or bulk sale, retailers should be asking, is this a legitimate return to start with?” Smith said. “That’s an area we see where retailers have an opportunity to focus on reducing the returns rate. Taking the decisioning out of the hands of an associate and into the hands of AI, it inherently has no bias. All it has is information on the transaction flow of that consumer.”

Retailers also need to move beyond a static, one-size-fits-all returns policy, and make it more adaptable based on data from each consumer — including metrics like lifetime value — and do all they can to make it a great, personalized experience.

The Apriss/Incisiv report found 41% of retailers offer shoppers an exception to their return policy, based on shopper history, but only 23% of them personalize the policy pre-purchase based on similar customer data.

“Typically, flat return policies are there to protect the retailer, but they can harm the best customers,” Smith said. “There is a lot of fraud and abuse within returns, and some policies are put in place to try to stop it. But today there’s much more sophisticated technology to work out which transactions are fraudulent vs. those that are absolutely normal.”

Incisiv conducted a hybrid online and computer-aided telephonic interview (CATI) survey of 131 retail executives in the United States between July 26 and Aug. 18.