Online shopping is faster and easier than ever, especially as consumers have become accustomed to one or two day delivery from e-commerce merchants. But after Christmas, the party’s over for retailers whose e-commerce sales will drive an avalanche of merchandise returns that are a major logistics challenge and financial drain.
Online returns are typically at least double the rate of returns for items bought in-store. In the last couple of years, a 30% online return rate for holiday sales was not out of the question. This is one area where in-store merchants have an advantage over online sellers.
That’s because when customers return unwanted items to brick and mortar stores, the merchant has the customer in-house and the opportunity to get them to buy something else or more in exchange.
A Chain Store Age article discusses more on this topic, which is excerpted below:
Retailers and shippers this holiday season will handle more returns than ever of goods bought online. That’s according to a new report from CBRE, which forecasts that online returns could total as much as $41.6 billion this holiday season. CBRE calculates a maximum value for this season’s returns of online purchases at $41.6 billion by applying the standard percentage range for online returns – 15% to 30% – to this year’s projected holiday retail sales of $138.5 billion. In contrast, the average return rate for merchandise bought in stores is roughly 8%.
For its annual report on online returns, CBRE again teamed with Optoro, a technology company that powers returns optimization for retailers and brands. Optoro estimates that the retail industry’s inefficiencies with handling returned merchandise result in $50 billion of lost profit margin each year and more than 10 billion instances of needless shipments and merchandise touches in warehouses.
“Returned merchandise has a massive impact on retailers’ bottom lines, so the industry is keenly focused on developing new ways to reduce returns and better process those that do come in,” said John Morris, CBRE executive managing director and Americas industrial & logistics leader.
Overview by Raymond Pucci, Director, Merchant Services at Mercator Advisory Group