{"id":74260,"date":"2023-12-19T15:56:06","date_gmt":"2023-12-19T20:56:06","guid":{"rendered":"https:\/\/www.radial.com\/?post_type=insight&p=74260"},"modified":"2025-04-29T07:04:27","modified_gmt":"2025-04-29T11:04:27","slug":"reverse-logistics-containing-costs-without-losing-customers","status":"publish","type":"insight","link":"https:\/\/www.radial.com\/eur\/insights\/reverse-logistics-containing-costs-without-losing-customers","title":{"rendered":"Reverse Logistics: Containing Costs Without Losing Customers"},"content":{"rendered":"\n
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Easy returns boosted e-commerce by easing shopper hesitation. During the pandemic, online orders surged\u2014and so did returns when homes turned into fitting rooms. BORIS (buy online, return in store) made returns easier, but high volumes pushed some retailers to refund without taking items back.<\/p>\n<\/div>\n\n

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Returned merchandise became a costly problem. In 2022, retailers processed $800 billion in returns<\/a>, according to the National Retail Federation. In e-commerce, returns spiked at 21.7% in 2021, then declined to 19.3% in 2022, and were expected to settle at 18.2% in 2023. It is forecast to fall to 14.7% by 2026<\/a>, according to Insider Intelligence. <\/p>\n<\/div>\n\n

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During the pandemic, retailers offered free returns to ease uncertainty. As things normalized, many began quietly tightening return policies to cut costs and discourage over-ordering.<\/p>\n<\/div>\n\n

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By mid-2023, more than 81% of retailers were charging for at least one return method<\/a> \u2013 and the numbers are expected to increase.  <\/p>\n<\/div>\n\n

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Introducing return fees has reduced return rates for 53% of retailers, but 48% have experienced lower average order values and sales. If this continues retailers may need to rethink their return fee policies and overall reverse logistics approach.<\/p>\n<\/div>\n\n

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Retailers are caught between managing the cost of returns and risking losing customers by making returns more difficult.  <\/p>\n<\/div>\n\n\n\n

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What consumers have to say\u00a0<\/h2>\n<\/div>\n\n
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Return policies heavily influence shopping decisions. Radial’s survey revealed that 68% of online consumers find a brand’s return policy crucial<\/a> when choosing to shop with them. PayPal found that 80% check return policies <\/a>before first-time purchases, and 55% abandon carts if the policy lacks convenience. <\/p>\n<\/div>\n\n

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Further, 76% of online consumers want retailers to offer free returns<\/a> with the brands covering the return shipping cost, and 64% want free returns at store. <\/p>\n<\/div>\n\n

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Consumers value having options. Among retailers charging for one return method while offering a free alternative, 59% saw more shoppers opting for the free return. Additionally, 39% of consumers expect free returns if free shipping isn\u2019t available.<\/p>\n<\/div>\n\n

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Where do consumers prefer to return items? Nearly two out of three (64%) favour in-store returns, likely for convenience. However, 48% would still choose mail-in returns, 39% want pickup by a carrier at consumer location, and 38% are happy to drop off returns at a third-party location.  <\/p>\n<\/div>\n\n

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Retailers struggle with the returns dilemma\u00a0<\/h2>\n<\/div>\n\n
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In a Radial survey<\/a>, three out of five retail executives reported that the biggest challenges they face in reverse logistics are the cost to repackage\/restock (60%) and returned inventory that cannot be exchanged (60%).  <\/p>\n<\/div>\n\n

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Additional challenges were maintaining healthy profit margins (43%), customers returning too much inventory without exchanging it (39%), and limited warehouse or storage space (14%).  <\/p>\n<\/div>\n\n

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When asked what change they would make to the returns process to improve profitability, again, three out of five retail executives reported that they would streamline the returns process (61%) and offer shorter return windows (61%).  <\/p>\n<\/div>\n\n

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Of those NOT charging for returns, 42% said they would charge, while 32% said they would partner with a returns partner to take reverse logistics off their plate, and 15% indicated they would implement a resale platform or discount channel.  <\/p>\n<\/div>\n\n

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It\u2019s clear that retailers need to continue to strategically address the returns process.  <\/p>\n<\/div>\n\n\n\n

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It\u2019s not just about profits\u00a0<\/h2>\n<\/div>\n\n
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Returns take a toll on the planet, too. In 2022, U.S. returns generated 9.5 billion pounds of landfill waste and 24 million metric tons of CO\u2082. Mail-in and warehouse returns add to emissions, while in-store returns that are resold help reduce this impact.<\/p>\n<\/div>\n\n

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While charging return fees helps to offset the cost of processing returns and the hit on revenue, it does not address the environmental impact. At a time when many retailers are highlighting their sustainability policies through using recycled packaging and reducing their carbon footprint, reverse logistics currently works against these efforts.  <\/p>\n<\/div>\n\n

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There are many factors to consider, but customer experience must remain the priority in shaping return policies. Failing to do so risks losing both customers and profits. Retailers must balance customer satisfaction with business needs and address underlying issues before implementing new policies.<\/p>\n<\/div>\n\n

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Gaining customer buy-in for change\u00a0<\/h2>\n<\/div>\n\n
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Before changing return policies, retailers should consider what drives customer loyalty. Shoppers value fair pricing, convenience, personalization, availability, respect, and flexible shopping options. Brands that meet these needs and build real relationships earn stronger, longer-lasting loyalty.<\/p>\n<\/div>\n\n

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Customers aren\u2019t loyal to brands\u2014they\u2019re loyal to how a brand makes them feel. If the experience slips too far, they\u2019ll move on. Strong relationships can buy forgiveness, but only to a point.<\/p>\n<\/div>\n\n

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People are generally more willing to accommodate undesired change when they have empathy for the reason behind it. In the pandemic overwhelm of a staggering number of returns, and the financial pressure retailers were facing, few retailers that implemented return fees gave any explanation to consumers.  <\/p>\n<\/div>\n\n

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Brands need to tell their story and give consumers the opportunity to understand the why behind the need for change; then invite them to be part of the solution.  <\/p>\n<\/div>\n\n

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Tell the returns story\u00a0<\/h2>\n<\/div>\n\n
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From a human empathy point of view, the returns story is one that consumers can identify with. Let\u2019s break down the components that offer opportunity to gain emotional buy-in from consumers:  <\/p>\n<\/div>\n\n

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