From Returns to Retention: Understand the Shift in Consumer Behavior

Since the start of online shopping, returns have been a significant concern for many retailers. A return incurs numerous additional costs: extra handling, not all products are eligible for resell, an increased burden on customer service, and sometimes a less positive customer experience. And because returns also contribute to additional CO2 emissions, the focus on bringing down returns has been intensified.

Improving product information and photography, better size guides, order restrictions, so-called blacklists, and analyzing reasons for returns are familiar measures. Every little bit helps! And more promising developments are on the horizon. Recently, we've observed trends that, in our opinion, further address the problem.

Consumer Sentiment is Shifting

Initially, easy returns were often praised in the early days of online shopping. However, consumers are increasingly becoming environmentally conscious about the impact of their return habits. This shift in mindset is expected to change consumer ordering behavior.

Retailers Are Beginning to Charge for Returns

To discourage returns, Wehkamp, since last year, has been charging 50 cents per item returned (with significant results!). Internationals like Zara are now also charging return fees. This trend aligns with the environmental awareness of current and future generations of consumers and will likely become part of the corporate social responsibility (CSR) policies of retail companies. Research on the effect of this on consumer ordering behavior (will they order less?) remains divided. However, one study (ref. University of Bamberg, 2019) predicts at least 15% fewer returns with less than 3 euros in return costs. Thus, the bottom line could improve significantly if this becomes common practice without a competitive disadvantage. Hopefully, we will soon have enough practical cases to determine the real impact.

Modern Technology Offers Promising Use Cases

Incorrect size purchases, especially in clothing, are unfortunately common. However, there is hope with 3D modelling of clothing and body parts such as shoes and feet. And, naturally, this could also be used for trousers, shirts, etc. Artificial Intelligence contributes by comparing previous purchases in terms of size (but also style and color) with products in one's cart, and providing early warnings for likely too large or small items. With the advent of AR/VR and digital worlds like the much-discussed Metaverses, it will also become possible to dress one's "digital twin" in the intended garments and then take a virtual walk around oneself. Could this prevent more disappointments after purchase?

Revival of the Physical Store Post-Covid

COVID and the associated lockdowns led many consumers to shop online, logically leading to more returns. The return rate in-store is usually more than 10% lower than online purchases. We are now seeing a (partial) shift back from online to physical shopping, which should, therefore, reduce the number of returns.

New Business Models Are Also Contributing

The concept of the shared car for people who only need a car occasionally is well known. A similar approach can also be imagined for tools that are rarely used, often facilitated through neighborhood apps. Even for clothing, subscription models are emerging, particularly useful for fast-growing kids or occasional wear. This trend from ownership to usage will indirectly reduce the number of returns or at least contribute to the more efficient use of products and the reduction of unnecessary production. Additionally, we see retailers bringing returned items back to the store floor as a cheaper alternative to the same, but new, item.

Get in touch

So, this is not an argument to take it easy when it comes to experimenting with ways to reduce returns, but rather a call to keep up the good work and continue striving for affordable sustainability. For both consumers and retailers. What is your organization doing to reduce returns? At Emixa, we'd be glad to share our comprehensive insights. Whether you're seeking a deeper understanding or have specific questions, don't hesitate to reach out to us.