Why customer returns are losing money for businesses – News
A UAB researcher explains why retailers prefer customers to keep purchased items instead of returning them.
With the holiday season coming to an end, many retailers are bracing for consumer returns requesting either exchanges and / or refunds.
Marketing expert and assistant professor Yufei Zhang, Ph.D., of the University of Alabama at Birmingham Collat School of Business, explains how this can be a big deal for retailers and offers his recommendations for mitigating these problems.
In his research study “Finding Information and Product Returns on Mobile and Traditional Online Channels,” Zhang explains that the issue of returns is particularly important for e-commerce because the relative rate of returns for online purchases eclipses the rate for offline purchases. Specifically, 30% of all products ordered online are returned, compared to 9% purchased in physical stores.
“When consumers return goods, it can cost the business billions of dollars,” Zhang said.
According to some expert predictions, “over the next few years, as e-commerce grows globally, the number of returns will exceed $ 1 trillion per year.”
The cost of a return takes into account not only monetary costs, but also labor costs. With the pandemic underway, there is a labor shortage and retailers cannot afford to waste this time.
Further emphasizing the challenges of online returns, retail giants Amazon and Walmart have started simply refunding the purchase price of certain products and telling customers to keep the products when they initiate a returns process. These companies believe this to be more cost effective, due to the extremely high return costs that companies have to incur when returns take place.
Zhang suggests that retailers will need strategic information about what factors increase the likelihood of customer returns and when short-term return costs might be offset by future customer purchases. More specifically, its study reveals that consumers return less if they use mobile channels to make their purchases.
Zhang also suggests that all retailers should have deliberate channel planning discussions on how to coordinate their digital channel strategies, especially when many customers have adopted digital channels.
“We also suggest that traditional online channels should incorporate, as much as possible, the convenience and flexibility that distinguish mobile channels from traditional online channels,” Zhang said. “Namely, traditional online channels could benefit from helping customers develop broader sets of considerations while shopping. “
Zhang says that in the future, managers should assess the impact of returns on future purchases in all categories and examine the differences in the relationships of returns and future spending between consumer segments.