Study: Return rates growing faster than revenue growth for most retailers

Retailers need a better strategy to manage returns.

Return rates are growing faster than revenue growth rates for 91% of retailers, according to a survey by Appriss Retail in partnership with Incisiv. The growth of e-commerce has increased return rates significantly, with online order return rates running three to four times higher than store-bought purchases, the study found.

Many retailers, however, have not adjusted their returns strategy accordingly. A majority (69%) are still treating returns as “a cost of doing business,” despite recognizing the benefits of optimizing returns management, the study advised.

The study found that 69% of retailers lack a good understanding of the root cause of their returns, and only 29% have an end-to-end strategic returns management program in place.

The “2022 State of the Industry: Returns as an Engagement Strategy” report found that:

• Forty-two percent of shoppers will stop supporting a retailer after multiple retailer-induced returns.

• Reducing return rates is a top priority for 83% of retailers but only 21% believe their current processes are effective at doing so.
• Similarly, 77% of retailers are interested in optimizing the cost of reverse logistics but only 29% are currently achieving towards this goal.
• Despite 64% of retailers reporting that returns are a problem they have been tasked to address, only 27% have an executive responsible for overall returns performance.

The study found that retailers who treat returns with a “one-size-fits-all” approach will miss out on important engagement opportunities. It noted that retailers can offer tailored return experiences based on the shopper’s previous behavior. For instance, at the point-of-sale top customers can be rewarded with extended returns windows.

Similarly, retailers can use customer data to generate relevant “save-the-sale” offers during the return process that provide time-sensitive exchange recommendations or other incentives for making additional purchases.

"Retailers spend millions of dollars trying to increase traffic to their stores and websites, yet many are missing a key engagement opportunity at the point-of-return,” said Steve Prebble, CEO, Appriss Retail. “During the returns process, retailers work directly with the shopper, giving them the opportunity to reinforce the brand experience. In this encounter, retailers can encourage shoppers to spend their refund dollars in-store or online, which recovers the lost revenue and strengthens the relationship.”

Incisiv conducted a hybrid online and Computer Aided Telephonic Interview (CATI) survey of 131 retail executives in the U.S. The study was conducted from July 26, 2022, to Aug. 18, 2022.