U.S. retail returns are expected to cost retailers $550 billion by 2020, with e-commerce leading the way.

The downside of a great retail holiday season? The aftermath of booming returns season. The United Parcel Service (UPS) expected to process 1.3 million returns on January 3 alone.

E-commerce is fueling growth in order returns. Overall, U.S. retail returns are estimated to cost retailers $550 billion by 2020, an increase of 75.2 percent from four years prior. E-commerce returns, meanwhile, increased by 94.8 percent between 2012 and 2017.

Convenient returns have become table stakes
“Return rates of 15 percent, 20 percent and 30 percent can crush the bottom line profit margins of retailers over the holidays,” Ed Kennedy, senior director of commerce at commerce and content technology provider Episerver, said. “But consumers have come to expect and even demand generous return policies. Many consumers knowingly purchase more than they intend to keep with the understanding retailers like Amazon and others have set the bar high for return policies and have even turned it into a loyalty building experience in the case of Amazon Prime and Amazon Local return stores.”

“The best way for online retailers to ensure customers have the most seamless return experience is to make the process as streamlined and convenient as possible, whether this be with pre-printed shipping labels, a clear policy or ability to return packages from home or a shared location,” Scott Webb, president at digital services and solutions provider Avionos, said. “For example, Amazon allows shoppers to drop off packages at physical retail locations and lockers, meeting customers at whatever return touchpoint is most convenient and saving them time and money to print new labels and purchase stamps and boxes.”

Episerver’s Kennedy also suggested that retailers mitigate the cost of returns by giving consumers incentive to bundle their orders into one shipment.

“Retailers can mitigate the risk of shipping costs eating into their margins by offering more generous promotions for orders that can be combined into one shipment on the initial order,” Kennedy said. “This can reduce upfront shipping costs and even create a small profit for retailers that charge shipping fees to cover the risk of return shipping costs.”

Reduce friction, synthesize offers across channels
Online and offline experiences should work together, said Darin Archer, CMO of e-commerce software solutions provider Elastic Path.

“If a consumer purchased something in-store, there’s often no real way to initiate a return online as the two systems have no clear picture of a single consumer,” Archer said. “Though some retailers have figured out the reverse — in-store returns of products purchased at an e-commerce site — without a unified picture of the customer, there will always be some friction in the e-commerce returns process.”

Episerver’s Kennedy agrees. “An advantage brick-and-mortar retailers have against online-only retailers is their physical locations.”

“Every touchpoint along the shopping journey is critical to driving purchases — returns included. To enhance this journey, retailers must provide the kind of seamless and convenient experiences that encourage customers to shop across channels and to make future purchases. Similar to how BOPIS (Buy Online, Pick up In Store) has helped retailers bridge the online/in-store gap, the ability to buy online and then pick up and make returns in-store is becoming a must-have.”

Messaging to offline and online shoppers should also connect better, Archer said.

“Over Black Friday weekend, twice I overheard a shopper say things like, ‘I see online there is a promotion that you’re not giving me here, how do I get that?’ or ‘I bought this online, but now see you have a better price in-store, can I return and repurchase?’”Archer said.

Smooth returns can increase customer retention
Customers remember bad experiences, said Webb. Avionos’ Consumer Expectations in 2018 (free with registration) report found that 53 percent of consumers feel most confident in an online purchase decision if the retailer offers a user-friendly return policy.

“Consumers aren’t as loyal to brands as they once were. So if they have a negative return experience, they’re more likely to turn to another retailer who can provide the options that meet their needs,” Webb said, suggesting that retailers put operational logistics in place to quickly ship products, and be transparent and clear throughout the process.

“Offering the convenience of easy returns is a minor cost when considering the alternative of having consumers shop elsewhere.”