Most merchants continue to report considerable challenges with returns. Two statistics from our research help to tell the story. First, 84% of merchants believe that their own returns processes are good or very good. Second, 75% say that it’s a high or very high priority to make them better.
How should we interpret these findings, which on the face of it seem contradictory? There are three factors to consider.
1) Merchants can only compare themselves with other merchants. If nobody seems to have solved the problem and everyone is just doing their best, then by the standards of the competition your own work might seem ‘good’ or ‘very good’, even if it hasn’t solved the problem.
2) We’re asking respondents to mark their own homework and tell us how good a job they think they’re doing. They may be reluctant to admit that their own decisions and approaches aren’t up to scratch.
3) It’s a really hard problem with multiple elements – experiential, financial, technological, logistical – and 99% of merchants don’t have the scale, resources or experience to truly solve it independently.
The fact that three in four retail businesses across Europe are making improving returns a high or very high priority would suggest that the 84% that believe their returns processes are good or very good cannot already have figured it out. They may not know exactly where their issues lie; they might find them hard to address; they might not see many examples of what good looks like in the market. But they know they have a problem and want it fixed.
We commissioned survey research of European e-commerce businesses for the second year running because we want to track the impact of global economic changes and a very different e-commerce landscape on returns. Last year I wrote that by failing to help their merchant customers manage returns and simply passively benefiting from the boom in reverse logistics, parcel carriers were at risk of missing out on a role that could rightfully be theirs, as partners and enablers of e-commerce success rather than purely logistics suppliers. The scale, expertise and relationships that parcel carriers enjoy make them ideal providers of real solutions to the problem of e-commerce returns, but many need a strategic shift to realize their potential in this arena.
Key themes continue to emerge
One-third (33%) of our sample told us that their returns rate was over 25% – these were predominantly retailers operating in categories such as fashion, health, children’s toys and books. With returns at such a high rate, it’s massively challenging to stay profitable. When more than one in four orders is not only unprofitable but actually generates no revenue and more than doubles in cost, any business will struggle to succeed.
The situation is worsening: 66% of respondents told us that the rate of returns they experience had increased in the past 12 months.
Prioritization and a new strategic course
Three quarters of respondents said that returns were now a priority item to fix, and this has been reflected in changing strategies in the market.
The past year has seen major retailers move away from growth-oriented returns strategies, where generous policies offered free return shipping (often via a preprinted label) and long windows within which consumers could return items for a full refund, no matter the reason they gave for their return.
However, in a climate where growth is no longer the primary objective, as the overall European e-commerce market slows, merchants are looking at ways to make their delivery and returns offering cost-effective as well as competitive. Customers are more likely to have to pay for returns than not – 53% of merchants in our survey reported charging a fee for returns, whether for shipping, restocking or other associated costs.
In general, returns have become an even higher priority than they already were, and for a broader share of merchants than before, thanks to strategic changes aimed at weathering a period of lower growth and reduced enthusiasm for online shopping due to the increasing cost of living.
This article was originally published in the December 2023 issue of Parcel and Postal Technology International.