Online retailing experienced a fair amount of growth during the COVID-19 outbreak. It still appears to be in its terminal stages, a sizable chunk of that gain is expected to stick. Meanwhile, traditional retailers have been retooling and upgrading to capture more online sales. However, back in the shipping department an unintended consequence has been piling up, mountains of returns, says Forbes.
For many retailers online was a response to a once-in-a-lifetime emergency when the COVID-19 outbreak struck. A year later, online has become an essential part of any retailer’s operations. However, the solution is creating headaches that many companies were unprepared for. Free returns has become the new normal, but returned goods are often badly packaged, damaged, or soiled. Therefore, they cannot be returned to stock. Stock is often returned to a different location than from where it was shipped. Not to mention the pernicious problem of fraud.
Return rates as high as 40%
According to Forbes, by some estimates, retailers have been seeing return rates as high as 40%. Before COVID-19, the annual value of returned goods in the US had been estimated at nearly $400 billion. The Wall Street Journal reported that consumers were expected to return $70.5 billion worth of goods purchased during the 2020 Christmas season alone.
Driving much of the problem has been the willingness of retailers to tolerate customers to order multiples of an item in different sizes, colors, or materials to try at home. This is a practice in fashion called wardrobing. Sometimes the retailers even encourage this behavior.
The holding costs of this inventory, inventory aging, and shipping appear to be the new markdown. Rather than discounting, let the customer run wild with returns.
Telling customers to keep unwanted items
For companies such as Amazon the cost of handling returns is so high that they are telling customers just to keep certain unwanted items. An acquaintance recently reported that Wayfair, a major online retailer of home goods, shipped him a sofa that retailed for $600. It was the wrong color. With no reasonable system for getting a sofa back into the box, or onto a truck, Wayfair shipped the customer another sofa and never arranged a return of the first one.