Retail Combats a $351-Billion Problem
The next time you think about returning an item to Amazon, be forewarned: Return too many items in one year, and you might just be exiled for good.
Amazon's controversial decision to ban return-happy customers in an effort to reduce returns costs shows the lengths retailers are willing to go.
Last year, total merchandise returns cost U.S. retailers $351 billion in lost sales. That number will climb as online retail becomes the default choice for convenience-craving customers.
Hundreds of retailers grapple with these losses. Despite growing concerns, many retailers see free and flexible return policies as an essential part of staying competitive—ignoring (for now) the risk that this billion-dollar "ticking time bomb" might one day go off.
To speed resales, create more convenient returns experiences, and use flexible policies as a selling point, retailers are finding new alternatives:
Crowdsource delivery for faster 1:1 customer returns. While many retailers are ramping up same-day delivery, few have focused on returns. Even Amazon requires most customers to drop off returns at the post office, despite customer demand for more convenient options.
So why not offer customers at-home pickup? Retailers schedule a pickup through a crowdsourced delivery fleet, customers leave items outside their doors, and then someone picks it up that very same day.
More than convenience, crowdsourcing returns allows for faster, and even same-day, restock and resell. Given that less than half of returned items are resold at full price, margin-conscious retailers are under enormous pressure to turn around product while it can still be sold at full-ticket value.
Invest in return optimization technology. Instead of abandoning returns at a distribution center or landfill, retailers are looking to emerging startups to help solve reverse logistics issues. These tech-enabled partnerships have become increasingly important since retail's omnichannel transformation.
Based on real-time data, Optoro predicts where to route returned items and determines the most profitable resale price, while Happy Returns provides centralized, in-person return locations for online retailers.
Some companies try to prevent a return from happening in the first place. Supply.ai's ReturnSense tracks customer behavior in real time and detects the likelihood of a future return, giving retailers an opportunity to intervene and suggest a different product.
Take advantage of physical footprint. Major U.S. retailers now use their brick-and-mortar stores for speedier delivery, leveraging ship-from-store capabilities to expedite returns, restocks, and resale.
Rather than letting distressed inventory end up in waste piles, retailers stand to gain something from their billion-dollar returns reality. By implementing a strategic returns policy, retailers can quickly restock shelves, resell items at profit, and build a more loyal customer base.
Who knows? Some may even lift the ban on customers who simply change their minds.