AREAS OF WISDOM

The Rising Cost of Returns

How Product Education Can Counter the 3 Main Reasons for Returns

Returns are an inevitable part of our modern economy, accelerated by the continued growth of online shopping. In-store and especially eCommerce returns are an increasingly costly problem:. 

  • Nearly a third of all products purchased online end up being returned to the retailer.
  • Processing the average return costs companies 59% of the item’s original selling price
  • Every year, American companies spend an estimated $50 billion on product returns
  • Returned items are responsible for massive landfill waste and 27 million tons of carbon dioxide emissions annually. 
  • Ecommerce return rates can be 2x to 3x higher than brick and mortar stores. 
  • The average eCommerce return rate hovers around 20-30%. 
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And while eCommerce sales, as a percentage of total retail sales, may be in line with pre-Covid years, the cost of processing returns is not. Labor, freight, raw materials and fuel costs are all higher than ever, and it’s directly affecting retailers’ and brands’ bottom line. In fact, 57 percent of retailers report that dealing with returns has had a negative impact on their day-to-day operations, and 20 percent reported having to increase the price of their products to offset the cost of customer returns. 

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Many companies have accepted that rising returns are just the cost of doing business and raised prices, accepted lower margins, or started charging for returns. They’ve also implemented strategies in an effort to reduce returns, such as creating more sophisticated sizing charts, offering exchanges and store credit. 

What if there was another way? What if they could prevent returns from happening in the first place?

To understand how to get ahead of the issue, it is important to first understand the reasons why people return products. 

1 Product Didn’t Match the Description

Problem: Products that don’t measure up to consumer expectations are the most likely to be returned. When purchasing online, customers typically rely on the product description, photos and reviews. But in a world of fake reviews and misleading information, the reality often doesn’t match the expectation. 

Solution: Using high-quality product videos, where your product is showcased in a variety of scenarios and use cases helps shoppers get a much better sense of the product, effectively setting expectations.  

2 Products Purchased with Intent to Return

Problem: Customers purchase multiple products from multiple stores before deciding which to keep and which to return.. This common practice is called “bracketing” and is on the rise. 

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Solution: Videos that feature an expert who can compare similar products, explaining the differences and educating consumers about the product – how it feels, how it works, who it works for – allow shoppers to narrow their selection and make the right purchase decision. 

3 Product Didn’t Work as Expected

Problem:, Especially in apparel, wrong sizing can be a big reason for return. With electronics, tools, etc shoppers have an expectation of how it will function and if it doesn’t cut it, the product is boxed up and shipped back. The likelihood of experiencing returns in apparel and tech is higher than in other industries. 

Solution: Educate your consumers about your products – what it is, how to use it, who it works best for. Helping consumers see the utility of the product and explaining how it functions, allows the shopper to make a fully informed purchase, reducing their likelihood of return. 

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Bottom Line:  An educated consumer returns 50% less and  65 percent of consumers say they can better understand using a product after watching a product video on it.  

By better communicating more clearly about your products and educating shoppers before they buy, allows brands and retailers to be more proactive in addressing the issue at its root cause. 

Product returns are costly both economically and environmentally. Re-focusing on product education can make a big impact on reducing returns and making shopping a much better experience for consumers. It is truly a win win. 

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