Why Ecommerce Returns Happen & What Retailers Can Do About It: Trends, Benchmarks, & Case Studies

Ecommerce returns or reverse logistics is one of the thorniest problems for both online shoppers and online stores. 

Because most online shoppers are not able to hold products in their hands before purchasing, Returnly found that 80% think about the returns experience before buying. New customers, in particular, heavily consider a brand's return policies before trying a new retailer. 

On the brand side, an operator at a DTC brand in our network says, "It's the trickiest thing to solve for in many ways because you don't want to face the fact that your products are going to come back to you."

Despite returns management being a problem that affects the entire business, ecommerce retailers tend to come at the returns problem in a siloed way: they update their ecommerce returns policy. Along the way, operators and executives within the company debate on whether or not to offer free return shipping, how to implement hassle-free drop off locations, or whether or not to offer online return labels.

Instead, retailers should first understand why product returns happen in the first place, how they can address those upstream merchandising or inventory management issues, and then figure out a  customer-centric ecommerce returns policy that aligns with their brand values.

Benchmarks: How sizing & bracketing affect ecommerce return rates 

Return rate is calculated by: 

Returned revenue in a time period / Total revenue in the same time period

Three factors contribute to the return rate:

1. Refunds
2. Variant or product exchanges
3. Store credit

Whether a return is a cash refund, a product exchange, or a store credit, most of them are due to sizing issues. 

Specifically, when ecommerce returns solution provider Loop Returns analyzed 300 Shopify brands and two million return events, they found that 52% of all returns – whether refund, exchange, or store credit – is due to sizing. 

Because of sizing issues, return rates are especially high for brands in the apparel, footwear, and intimates verticals. 

Due to the inability to visit a physical store, customers have resorted to bracketing – a global retail trend that has been accelerated by the pandemic. 

Shoppers practice bracketing when they…

1. Order multiple sizes/colours of a SKU
2. Use their bedroom as their defacto fitting room
3. Pick the colours and sizes they want and return the rest

Knowing that sizing and bracketing are the biggest reason for returns, brands can then offer ways to get sizing and fit right the first time around. ‍Companies like TrueFit and Fit Analytics (recently acquired by augmented reality social media company Snap) offer services that are similar to virtual fitting rooms.

But getting sizing right in order to stem the tide of returns doesn’t need new technology. Reducing store returns and increasing profit margins might just require clearer sizing and fitting on product pages.

For example, Atoms – a DTC footwear brand – measures sizing with its “Find Your Fit quiz. 

The quiz takes a customer’s gender, age, foot arch and width into consideration. 

The quiz also asks the customer what brand, model, and size of shoes they currently have.

Because of this quiz, Atoms retains customer data that helps them deliver best fitting shoes to the customer. 

This results in lower online return rates, better customer retention, and a higher number of positive customer reviews for Atoms.

Dealing with return shipping & free returns

Despite a retailer’s best efforts, however, returns will still happen. 

According to Narvar’s Consumer Study 2020, 33% of returning customers who have a difficult returns experience would not shop with a retailer again.

At the same time, 76% of first-time customers who had a positive return experience said they would shop at that retailer again.

The key is to map out a returns process that mirrors the quality of your order fulfillment experience. Research shows that returners just don't want to deal with mail services:

The same report from Narvar found that customers who brought returns to mail carriers dropped from 40% to 35% last year. Along these lines, 31% of returners (up from 17% in 2019) wanted alternative return locations, such as the nearest store or a retail location partner. 

Compounding the difficulty of returned products, 36% of ecommerce returns processes experienced substantial delays.

In the event that returners do decide to package up their items, they absolutely do not want to pay for shipping. They are even willing to pay restocking fees to avoid shouldering shipping costs.

This said, the research reveals a bright spot: as long as refund expectations and timelines are communicated clearly, customers don’t mind a returns process that falls short of Amazon return standards. 

Highlighting easy mail-in returns and prompt refunds in the ecommerce returns policy, as well as frequent communication in the returns process, will go a long way towards retaining customers. 

Being good at ecommerce returns helps the bottom line

Clearer measurements and product pages help a customer visualize the product on their bodies or in their hands. This helps decrease the workload on an ecommerce business’ customer success team, especially during the post-holiday season returns rush.

A returns policy that generates revenue is a balance between making sure the customer gets a product that they're going to use and enjoy, while balancing the internal costs of restocking and facilitating easy returns and exchanges.

Brick and mortar retailers investing in ecommerce must accept that returns will happen more often for online orders than offline. 

Instead of viewing returns as a thorn on their site, retailers can view returns as an avenue to lead their respective verticals and market their brand. This is because a stellar online returns process fosters customer loyalty, increase customer satisfaction, and in the long run, increase customer lifetime value because so few retailers do it well.