Handling returns - Security Tags

Retail’s costly returns challenge

Kyle Hall — Fri, 07 May 2021 00:53:44 +0000

In a retail landscape where the consumer experience is designed to be frictionless and omnichannel is par for the course, returns are emerging as a major challenge for retailers.

Not only does handling returns cost a retailer time and money, but returned merchandise also presents a fraud liability and as Retail Dive recently noted, has a very real environmental impact as well.

Here’s an insight into the challenge that retailers now face when it comes to managing returns.

The returns reality

According to the National Retail Federation, customers returned $428 billion worth of merchandise in 2020.

To put that in perspective, that equalled 10.6 per cent of total retail sales last year and equated to $106 million worth of returns per $1 billion in sales.

While the percentage of returns compared to sales was roughly in line with the year prior, the NRF did go on to note online returns had experienced a marked increase that could arguably be attributed to COVID-19 and the year which saw most people shopping over the internet.

Meanwhile, the top categories of merchandise returned included:

auto parts (19.4 per cent).

apparel (12.2 per cent).

home improvement (11.5 per cent).

housewares (11.5 per cent).

More than one-fifth of returns were completed through credit cards, followed by cash (12.7 per cent) and debit cards (7 per cent).

And, while retailers may aim to make the return process simple in the interests of satisfying their customer, managing returns comes with a series of hidden and obvious costs.

A fraud liability

Returns have always offered the potential for fraudulent activity, and as the NRF explains, last year was no different.

Of the returns made last year, they found roughly 5.9 per cent, or $25.3 billion worth, were fraudulent.

In online retail this percentage rose, with 7.7 per cent of returns to online retailers labelled fraudulent.

Ultimately that means for every $100 in returned merchandise accepted, retailers lose $5.90 to return fraud.

The hidden cost

When it comes to handling returns, it costs a retailer time and money, but often this isn’t measured.

There’s the cost of serving the customer as they make the return, then there’s the time involved with inspecting the packaging, and sending it back through the supply chain to get it back on the shelf (if indeed that’s where it is to end up).

Retail Dive recently argued measuring the cost of returns properly could improve the retailer’s bottom line.

They note most often, retailers look at their sales but do not look at returns, with the major reason being that data is often siloed throughout an organization.

Environmental issue

In addition to costing the retailer, Retail Dive also notes returns take a very real environmental toll, and in the future that could well impact the customer’s perception of an organization’s sustainability.

Many customers believe they make a return and it’s simply placed back on the store’s shelf or repackaged and resold online.

Often, that’s not the case. The item is instead directed to a landfill or destroyed, with around five billion pounds of goods ending up in landfill annually.

Then there’s also the further environmental cost of the transportation required to handle returned goods.

So, what’s the answer?

Finding a solution to the return challenge

Handling returns properly lies in retailers having a deep understanding of the process, its cost and its impact.

There should be policies in place instore to minimize fraudulent claims, while each retailer should be mapping exactly what happens in the returns process.

Then, Retail Dive argues it could be time to investigate new models that are designed to minimize the environmental impact and improve the retail bottom line.

You can read the recent Retail Dive article on sustainable returns here, or view the strategies available to reduce return fraud here.

The post Retail’s costly returns challenge first appeared on Security Tags.

The rising tide of holiday returns

Kyle Hall — Wed, 06 Nov 2019 05:31:55 +0000

You can learn more about this year’s retail holiday predictions here or gain a further insight into the link between shoplifting and return fraud here.

Retailers may be rubbing their hands together in glee that this year’s peak period is set to deliver strong results, but for many, there will also be a sense of trepidation that the New Year will see a significant portion of those items returned.

Last year, the National Retail Federation found 11 per cent of all holiday sales would be returned for a variety of reasons, with some more legitimate than others.

Here’s an insight into the rising tide of returns, and the top strategies retailers can employ to minimise risk.

An increasing trend

A number of recent reports have illustrated the increasing trend of returns. And in an internet age where customers are set to make more of their holiday purchases online this year, it only stands to reason.

Online purchasing means many consumers do not have had the opportunity to sight, touch or feel an item in person and in the case of apparel they have not had the chance to try that item on. Retailers often seek to accommodate by offering the option of easy and convenient returns in a bid to lure customers in.

Meanwhile, the post-holiday season sees a bump in returns as gift recipients and gift-givers exchange or return unwanted items.

Holiday return stat’s

In 2018, the National Retail Federation found retailers anticipated 10.6 per cent of all annual sales are returned with holiday sales seeing that increase to 11.1 per cent.

Erring on the side of caution, data firm APPRISS put a conservative dollar figure on that amount. Working on a 10 per cent return rate, they noted the value of returns in 2018 equated to $369 billion, while holiday sales returns would be worth approximately $72 billion.

Interestingly, online returns are also impacting bricks and mortar, with the NRF noting many retailers reported seeing more online purchases returned to physical locations, with 37.9 per cent reporting increases in buy online, return in store.

The trouble with returns

Handling returns delivers a wealth of challenges to retailers. On the one hand, both bricks and mortar and online retailers wish to accommodate an increasingly fickle customer, but on the other returns can be time-consuming, resource-intensive and costly. They can also be fraudulent.

In 2018, the NRF found 8.2 per cent of all returns were fraudulent and that rose to 10.3 per cent during the holiday sales.

Meanwhile, the trend of convenient returns is also resulting in a new phenomenon known as the “serial returner”.

The serial returner

Classified as a customer who regularly buys multiple items with the intention of returning some, serial returners are increasing, according to a report by Brightpearl.

They found almost half of customers agree that they will at some point buy multiple items with the intention of sending some back, and retailers have also acknowledged an increasing problem.

In the US, Brightpearl noted 42 per cent of retailers had encountered an uplift in intentional returns between 2017 and 2018.

Handling returns

In May last year, Amazon introduced a lifetime ban on serial returners, in a move which was widely supported by consumers.

Blackpearl explains over a quarter of US survey respondents strongly agreed with the approach, while only seven per cent strongly disagreed and only 11 per cent said they would never shop with an online retailer who imposed this condition.

Their research also found other retailers might be willing to follow suit, with 61 per cent of US retailers saying they would ban serial returners from their website permanently, while fewer than one-quarter were not inclined to follow this approach.

But there are also other options available when it comes to handling returns, as Blackpearl notes.

These include:

Offering clearer returns policies (supported by 55 per cent of US consumers)

Introducing a maximum returns quota (supported by 40 per cent of US consumers)

Limiting the time that customers have to return items (supported by almost 40 per cent of consumers)

Introducing temporary bans (supported by over 30 per cent of US consumers)

Limiting offers and promotions (supported by just under 15 per cent of consumers)

Raising the price of items to cover the cost of returns (supported by just under 15 per cent of consumers)

When it comes to return-fraud, retailers also need to be clear in their return policy and vigilant when refunding items for gift cards or cash. Importantly staff should also be educated in these policies, and return numbers and instances should be regularly reviewed.

You can learn more about this year’s retail holiday predictions here or gain a further insight into the link between shoplifting and return fraud here.

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