What: The cost of living and rising inflation might be a new component of the e-commerce returns equation.

Why it is important: Returns are directly hitting the bottomline, and retailers are scrambling to find ways to either reduce them, or change their customers’ behaviour, by, for instance, charging them when returning items (a not so popular policy).

The Economist takes a look at e-commerce, and the difficulties created by the management of returns (21% of all online orders in America in 2021, for a total value of $218bn). This problem lies deep in the DNA of e-commerce: free returns are perks that were made available since day 0 of e-commerce, to be able to compete with brick and mortar stores. As a consequence, it is now a basic expectation.

However, with the rising inflation and increase of cost of living, this might become a problem. Boohoo and Asos have already lowered their forecast in anticipation of a higher return rate. Each step is costly and labour-intensive. In addition, the question of what to make of the returned items is raised (only 5% of returned goods can be resold immediately), leading in more costs for the retailer. As a consequence, some retailers, such as Uniqlo or Zara, have started to charge for returns. Tech might also come as a help, either to try to solve the issue by providing help on the logistics front, or by helping customers to virtually try their products before buying them.

A tidal wave of returns hits the e-commerce industry