'Tis the Season for a Returns Strategy

December 23, 2019

An estimated 34 percent of American consumers planned to return or exchange a holiday gift in the aftermath of the 2018 holiday season, according to a January 2019 survey of U.S. consumers by WalletHub. Of that 34 percent who planned to exchange or return a gift, 68 percent said that they were returning clothing, while 23 percent said they wanted to return electronic gifts. One in five said they were planning to return toys. And this year, UPS says they’re expecting return rates to be even higher. The carrier is anticipating 1.9 million packages being sent back to retailers on or near Jan. 2, 2020.E-commerce merchandise is more likely to be returned than items bought in physical stores, with a 30 to 40 percent return rate for shoes and clothing bought online. The challenge of e-commerce returns has shed light on behavior by forty-one percent of consumers known as ‘bracketing’. This is when consumers purchase multiple sizes or colors of the same item, with the intention of keeping only those that work for them. There are many roadblocks for an international consumer attempting to return or exchange a gift purchased from a cross-border e-commerce retailer. To prevent additional frustration for cross-border consumers who need to return or exchange gifts after the holidays, it’s important to have a reverse logistics strategy ready to go before the holiday shopping season starts. The holiday retail season can be a huge learning experience for retailers that are new to cross-border selling. More experienced retailers have likely spent most of the year preparing their global supply chain and getting it up to speed to handle higher demand around the holidays. This can include re-evaluating and making changes to relationships with last-mile and long-distance transport partners, changing warehouse or logistics management software, and tweaking customer-facing return policies. An international reverse logistics strategy should also take into account country-specific regulations that apply to cross-border goods and online purchases. For example, consumer protection laws in the U.K. state that a person who bought a product or a service online or outside of a shop (by telephone, mail order, from a door-to-door salesperson), has the right to cancel and return an order within 14 days, for any reason and without justification. This regulation supersedes any corporate return policy that brands and retailers may have. For cross border e-commerce merchants, reverse logistics are often more expensive than forward logistics due to additional labor and restocking fees. Then there’s the fact that only about half of returned merchandise is resold at full price. Also there are additional costs potentially involved in international returns. For example, there might be duties or taxes involved when sending a product back to the country of the retailer. Given the high cost of cross border e-commerce returns, brands and retailers must work to identify why returns are happening and address these drivers before a purchase turns into a return. Our own research shows that 10% of consumers in the top 11 global e-commerce markets abandon their shopping carts due to a retailer’s return policy. Sometimes, this is a matter of refining and clarifying your brand’s return policy. For example, L.L. Bean was forced to take a hard look at its famous lifetime return policy when they realized that it was costing the company more than $250 million in losses over the last five years, much of it from frivolous and even “abusive” returns. Other times, it can be a matter of quality control for a retailer’s order fulfillment center. According to Logistics Matter, 23% of consumers ended up returning an item because the wrong product was sent to them.For brands that are entering multiple global markets, it’s important to be aware of country-specific behaviors and preferences around returning online purchases. Germany, for example, remains the “return champion” of the EU. Twenty-five percent German consumers send back 10 to 25 percent of all online orders, while 14 percent return one out of every four products they ordered online. Understanding this before you launch your localized e-commerce website in Germany is important because you will need to ensure that your return policy is clear and detailed, and your online product descriptions, photos, and sizing charts are as accurate as possible to help minimize the need to make returns.International retailers should be aware that consumers today do not expect to cover the cost of returns. Our research showed that shoppers in 8 out of the 11 top global markets opposed the idea of paying for returns, with 71% of all surveyed consumers stating that they would not be willing to pay for returns. Interestingly, consumers in Japan, China, and India said they would be willing to pay for returns (54%, 49%, and 41%, respectively).

Paying for returns

Source: Flow Global Consumer Insights, 2019

To improve the cross border returns process, brands and retailers must provide transparency and visibility in their customer-facing policies. Global consumers want to shop with brands that will make returns hassle-free. This includes giving customers clear instructions for returning an item, providing customers with a printable customs form (if necessary) and shipping label, and crediting customers’ accounts promptly once the transaction is complete. Similar to shopping domestically, cross-border shoppers expect retailers to be able to provide tracking information for returns and other information on the status of the return.The 2019 holiday retail season is shaping up to be a record-breaker for e-commerce merchants. But without a strong reverse logistics strategy, any gains made in sales revenue can be overshadowed by losses caused by too many returns.To find out more about how Flow helps cross border e-commerce companies create a more robust reverse logistics strategy, get in touch today.