What: Returns are a retailer’s nightmare when it comes to e-commerce.

Why it is important: many solutions are being explored, from charging returns, asking customers to return items in stores, or letting them keep the goods.

Online retailers are grappling with high return rates, costing them significantly. Around 20% of online purchases are returned, resulting in a $642 billion annual expense. This issue is prompting retailers to explore various strategies to reduce these costs:

1. "Keep It" Policies: Faced with high return costs, 59% of major retailers, including Amazon and Walmart, are adopting "keep it" return policies. This approach, while cost-effective in the short term, is not sustainable due to potential abuse by customers.
2. In-Store Returns: Encouraging customers to return items in-store is another strategy. This not only saves on shipping costs but also increases the chance of additional purchases by customers and immediate restocking of returned items.
3. Charging for Returns: To deter excessive online returns, about 40% of retailers now charge for returns. This includes companies like JC Penney, Zara, and H&M. While effective in reducing returns, this approach may be unpopular with customers.
4. Enhancing Online Shopping Experience: Retailers are investing in technology to improve size and fit estimations. For example, Bershka collaborated with 3DLOOK for a virtual fitting room, significantly reducing return rates. Zara uses user-generated photos to give a realistic view of their products, enhancing customer satisfaction with their purchases.

These varied approaches reflect the urgent need for retailers to address the high cost of returns, balancing customer satisfaction with financial viability.

The billion dollar return nightmare: Why retailers are enabling ‘Keep It’ policies