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The Real Cost of Returns for Retailers

Lindsay Boyajian
Lindsay Boyajian
Guest Contributor

Product returns are a costly expense of doing business, particularly with online shopping, and managing the increasingly expensive ‘reverse supply chain” has become a priority for retailers of all sizes.

The emergence of online commerce has given shoppers the benefits of anytime-anywhere shopping and doorstep delivery. In a race to outperform the competition and increase the customer’s lifetime value, retailers are raining discounts and offering incentives like hassle free-returns.

Returns come at a cost to retailers

However, free returns are cutting into margins of already struggling retailers. Clear Returns estimates returns cost UK retailers £60 billon a year, £20 billion from items bought online. Even top retailers are grappling with the cost of returns, as Amazon spent $6.6 billon on delivery in 2014, yet only received $3.1 billion in shipping fees.  

Retailers face a major challenge. Consumers expect free returns, and inconvenient returns deter 80% of shoppers according to a ComScore study.  However, retailers are struggling to offer this because they can’t absorb the cost into their bottom line.

Delivery Man

Mitigating the cost of returns

Retailers are investing in strategies to improve reverse supply chains to help mitigate the costs of returns. For instance, brick-and-mortar retailers with online shops are now offering in-store returns. Sixty-two percent of shoppers are more likely to shop online if they can return product in-store. This policy not only reduces shipping and handling return costs for retailers, but also drives shoppers to the store. Once inside, shoppers can be engaged and enticed to make additional purchases.

According to Invesp, 22 percent of returns are because consumers receive a product that looks different than expected. Online shoppers can’t look, feel, and try products as if they were in the store. There is a lot of guesswork for consumers when shopping online, and retailers are the ones who pay.  After all, 30 percent of all products ordered online are returned, compared to 8.9 percent in brick-and-mortar stores.  

There are strategies earlier in the buyer’s journey to reduce returns and to remove post-delivery surprises:

These strategies still often fall short, which is why retailers are turning to new technologies like augmented reality (AR) to bring the in-store shopping experience home.

Leveraging AR to reduce returns

Shoppers regularly express the absence of ‘try-on’ and ‘touch and feel’ as the major reasons they don’t convert online. Even with all the perks and benefits of online shopping, it has a far lower conversion rate than shopping at physical stores.

With AR, consumers can virtually try products at home before buying. Augmented reality helps mitigate challenges of online shopping by bringing the in-store experience to eCommerce. With an AR-enabled app like Augment, you can empower customers to see how products look in their homes. They can try different colors and finishes, and compare products side-by-side in life-like 3D AR.  

Augment's Try Before You Buy

This application of AR applies to many industries, including fashion, home decor, furnishings, and electronics, and many leaders embrace this technology. In 2016, Wayfair launch its augmented-reality app, WayfairView, allowing users to place full-scale 3-D virtual models of furniture in their homes. Consumers quickly get a sense of look and size of products as if they were in the store. AR removes the guesswork and facilitates the path to purchase.

Augmented Reality eliminates one major bottleneck that customers face when shopping online, which eventually results in returns. By refining the earlier stages of buyer’s shopping journey, you will have customers who are less likely to return your products, resulting in lower costs.

About the writer:  Lindsay Boyajian is the Chief Marketing Officer of Augment, the leading augmented reality platform for retailers & manufacturers. Lindsay is an B2B marketing professional passionate about industry-changing technologies. 

Join the #retail, #inspiringretail & #SmartStore conversations on Twitter @RetailNext & @LBoyajian, as well as at www.facebook.com/retailnext.


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