E-commerce product returns have a harmful impact on the environment and business margins. ThreeKit President Joachim Klein asks why retailers aren’t trying harder to prevent them.
During the holidays we set aside time for those chores tackled but once a year — putting up (and taking down) the lights, managing the logistics of overlapping family gatherings, and locating all the supplies necessary to pack, tape and return the inevitable pile of unwanted gifts.
Yes, returning gifts has become a new post-holiday tradition. And given that UPS predicted a 26% increase on "National Returns Day" (that's January 2nd for those not "in the know"), retailers might do well to sell "Thanks…but No Thanks" cards right alongside the traditional "Thank You" variety. Perhaps it's easier to rationalize a return when you can pin the blame on "Old Aunt Ruth who has always had terrible taste," but here's the ugly truth — the average holiday return rates are only about 2% higher than the rest of the year.
In other words, it's not a holiday phenomenon, folks. It's a human phenomenon.
Product returns continue to creep upwards for fairly obvious reasons. First, people are shopping online more. From a retailer's perspective, free shipping and returns is a great incentive to get and keep customers (about 49% of e-commerce retailers now offer free returns). And, from the shopper's perspective, if the service is there, why not use it?
This is all fair and logical reasoning, but if we really want to hear all sides, the environment would like a word.
The overall explosion of products shipped isn't exactly good news for the planet, but returns are especially pernicious because of the outsize, arguably preventable, waste and loss associated with them.
It starts with the additional packaging and cumulative CO2 emissions incurred through returns (that's 5 billion pounds and 15 metric tons per year, respectively). But there are also unseen costs. The robust logistics machines necessary to get those products back to the retailer or a reseller. The times that a brand-new unused product winds up in a landfill (alongside all those piles of packaging), because it's simply more efficient to cut losses than find a home for the merchandise. In all, about 5 billion pounds of unsold goods and excess inventory fill US landfills every year.
One could argue that the reason we're in (literal) hot water is because industry has, more often than not, chosen to pursue healthy profits rather than nurture a healthy Mother Nature. But here's the rub — product returns are just as bad for retailer margins as they are for air quality. The expense of handling returns can range from 20% to 65% of an e-commerce site's cost of goods sold. Forty-four percent of U.S. and more than half of U.K. retailers have said the increase in returns has "strongly affected margins."
Yet, for a practice with detrimental side effects all around, the returns quandary has been met with a kind of quiet resignation. A "this is just the cost of doing business in the digital age" shrug. Start-ups like Optoro have emerged to green and streamline the returns process to mitigate losses, but there has been no serious and persistent effort to prevent returns on the front end of the transaction. We have to start treating the root causes as well as the symptoms. The good news is that those root causes are relatively clear.
An estimated 64.2% of online shoppers report that they make returns because "items don't match the description or expectations", a reason second only to "damaged goods." It seems that online shoppers do not always have a full confidence that what they're buying is "right" either due to insufficient or misleading product details.
When you look at the uneven shopping experiences across e-commerce channels, this figure starts to make a lot of sense. There are no standards for how much product information is "enough," so ultimately, it's up to each vendor to determine. But for those who are looking to significantly reduce the misaligned expectations that lead to so many returns, science suggests that product visuals are the place to invest.
To start, a visual medium calls for a visual solution. When we go online ready to shop, we're naturally prone to seek imagery. In a Baymard Institute product page study, 56% of the test subjects' first actions upon arriving at a new product page was to begin exploring the product images, before reading titles, descriptions, or scrolling down the page to get a more comprehensive overview. Imagery is your first best way to convey exactly what you're selling.
Providing a sufficient number of different images per product page is crucial, and that number has increased significantly in the past three years. In 2016, customers expected three and today they expect eight or more. Today, Amazon only allows six different images per product page, and they aren't alone failing to meet this benchmark.
Another consideration is advanced technologies like 3D configuration and augmented reality that have proven to reduce returns between 30% and 50%. When people can build and see what they are going to purchase in real-time and view it from all angles, it goes a long way in instilling customer confidence and ensuring they get exactly what they pay for.
True, these suggestions are a lot easier to type out than to implement, particularly if marketing budgets are tight. However, given the positive impact they could have on a retailer's bottom line, they're an investment that would likely pay for itself in short order. After all, a picture is worth a thousand words…and perhaps in this case, millions of returns.