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Many Unhappy Returns

November 4, 2022 Kevin Baxter


With Halloween candy hauls dwindling, the holiday gift-giving season - and relatedly gift-buying season - takes center stage. While the ideal scenario is everyone liking - and fitting into - every present, returns are inextricably linked to this time of year as well, with an estimated 16.6% of items going back last holiday season. Everything sounds normal so far, right?

Welp. Bringing (or sending) back an unwanted gift has gotten harder of late. We've gone over the concept of reverse logistics, which accounts for the "how" of companies getting previously sold items back into the fold of their supply chain process. When a customer returns an item, the retailer processes it, determining if it can immediately be resold, needs to be discarded or if the manufacturer must evaluate it. If evaluation is necessary, the manufacturer receives the item and may repackage or refurbish it for resale, or discard it.

That's a Cliffs Notes version of the process, but there are definitely cost centers sprinkled throughout. In fact, a recent survey of e-commerce providers showed returns cost them an average of 21% of an order's value. The Wall Street Journal points out that especially during the height of the pandemic, retailers relaxed return policies and tried to ease the process of sending items back to entice customers to keep shopping. Now, as many retailers fight to maintain their margins, some - like the companies under Gap brands as well as J. Crew - have shortened their return windows.

And PayPal has announced it will stop providing free return shipping labels or refunds for return shipping costs. That all adds up to make what can already be a cumbersome return process more difficult for the consumer. It's a delicate dance, though, because while retailers want to avoid losing money on returns, they must take care not to turn off customers who have said a bad experience can cause them to take their business elsewhere.

What is bracketing in shopping?

When it comes to returns, especially for e-commerce, bracketing (AKA bracket buying) is a major culprit. Shoppers engaging in bracketing buy multiple sizes of the same item to find the right fit - all along intending to return the ones that don't make the cut. This is understandable from the consumer's perspective, as sometimes there really is only one way to determine fit and whether the clothing or shoe looks the way in person that it does on a screen.

But the bracketing process also means that a retailer only makes money on one of three or four products it sells, while the customer sends the others back - typically at the retailer's expense. And with more seasonal or trendy fashions, those are typically not resold due to the lost time and changing tastes, meaning the store would lose out on any revenue from those products. Thus some retailers, such as Zara did over the summer, began charging a $3.95 fee to return online orders by mail to recoup at least some costs.

What are the logistics of returns?

The logistics of returns involve shipping anytime a customer decides not to bring an item back to a physical storefront or when a physical storefront doesn't exist in the case of fully online retailers. So e-commerce sellers particularly must have a strategy for how they accept returns.

A typical return logistics process involves the customer contacting the retailer, printing a return label provided (and usually paid for) by the retailer, repackaging the item themselves, and then sending it back via carriers like UPS, FedEx or USPS. In some cases, these carriers may pick up the item from the customer's home, but in many cases the customer must go to a designated location to initiate the shipment. Once the return is made, the reverse logistics process outlined above, starts in earnest.

If you're a retailer struggling with your return/reverse logistics processes or keeping products in stock, let us know, and we'll be happy to follow up with solutions. Looking for more information? Visit our Resources page for more on freight and logistics - and us. Or start with one of the links below: 

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