Exclusive Q&A: Retailers have a returns problem —here’s how to deal with it

Retailers may not be able to avoid rising product return rates, but they can effectively respond to them with technology and strategy.

Chain Store Age recently spoke with Keith Jelinek, managing director in the retail practice at Berkeley Research Group (BRG), about increasing product returns and what retailers can do to effectively manage growth in returns.

What factors are increasing return rates?
There are three main factors. First, it is natural that as we see retail sales continue to climb, the return rates will also climb. Second, as online sales penetration continues to escalate, more people order a broad range of sizes, colors, and styles, try on at home, and return what they do not like.  Third, the COVID-19 pandemic has forced more consumers to hesitate using dressing rooms, in which they also buy a broader range of sizes and styles, take them home, try them on and return the rest.

How can retailers process returns in a cost-effective manner?
Processing returns is extremely costly for retailers. Product must be shipped back, in which the retailer usually pays, then it needs to be opened and checked to make sure it is sellable and put back in stock. In some cases, the product is out of season when it is returned and must be marked down. It is less costly if retailers can provide additional incentives and services for the customer to return products at the store. That way it can be inspected and put back on a rack for sale in a timely manner.

What steps can retailers take to reduce omnichannel return rates?
According to recent data from the NRF, online purchases had a returns rate of nearly 21% in 2021 – that accounts for $218 billion dollars, out of $1,050 trillion. The three categories with the highest return rates were auto parts, apparel, and home improvement.

[Read more: Retail returns jump to over $750 billion amid online sales growth]

When you think about it, all these categories have a common denominator: size. As an example, it is either the wrong size of a cable for your car battery, or it is the wrong size of pants, or it is the wrong size of a rug for your home. Retailers need to ensure that the right product information, clear descriptions, pictures and especially dimensions are available online for consumers to help them make the right selection.

There are many advances in virtual technology to assist in seeing how the product will look on me, or seeing how the rug will fit in my home, etc. Retailers need to progress further in these areas in order to help reduce the omnichannel return rates and reduce expenses.  At the end of the day, all of this is most important to satisfy the customer. In the end, no one wants to have to deal with a return, then wait to re-order another item. It needs to be right the first time.  

Are there ways to turn returned products into a competitive advantage?
Absolutely. Every touch with the customer is a chance to please or disappoint them.  The returns process is no different. Retailers need lenient return policies, but these should not be taken advantage of. There is a trend in the marketplace, many using chatbots with AI, even a real person from time to time, that considers the customers’ loyalty (how much they spend) and weighs against the cost of returns – in many cases, the customer is told to keep the item, and suggests donating it to a good cause.

Retailers know in many cases this creates goodwill, but also eliminates the costs of processing a return, knowing the customer will continue to spend and order another product, and more. That last impression you leave with the customer, and in the case of the data we referred to whereby 21% of digital purchases were returned, means that in one of five times your customer must make a return, you have the opportunity to increase their loyalty to your brand, if you do it right.