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E-commerce Return Rate: what is it, why is it important and how to decrease it.

Francesco Pastorelli
Marketing Growth Lead at Make Influence, I have a background in growing early stage startups through digital...

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Let me make this clear: product returns are probably the biggest problem for your e-commerce brand. 


Every time a product is returned, you have to bear significant direct and indirect costs, from logistic to inspection and re-packaging passing through fee for reimbursement. 

On average, in 2020 retailers in the US accounted for around 10-20% (depending on the industry) of their sales to be returned.

When it comes to online sales returns, the measure is almost always above 20 percent, and this rate increases to 30% during the holiday season. 

In other words, every 3 or 4 items sold, 1 is returned.  

And yet, not having a free return policy is widely considered to be a suicide for e-commerce stores these days, probably your best move to kill  your conversion rate.

Let's discover in this article what product return rate is, why it is important and how you can mitigate it.

 

Navigate to section:  

  1. What is product return rate? 
  2. How can Influencers be used as a performance marketing channel?
  3. How can you lower your product return rate? 

 

 

What is product return rate? 


The concept of product return rate is very simple, and it is defined as the percentage of goods sold that is returned to you by the customer.

Product returns are a standard in every industry, but apparel, footwear, fashion and beauty brands are definitely the ones most affected by returns. 

When it comes to typology of sales most affected by returns, online sales see return rates usually twice higher than brick-and-mortar shops. 

Why is the return rate so high Because returning goods is actually incentivised by merchants that offer free return policy, in order to increase conversion rates and basket sizes. 

In other words, shoppers are incentivised more than they need, get products delivered to their place (often with free delivery, because of the significant orders) and then benefit of the free return policy to get rid of the items they like the least. 

When it comes to fashion and apparel, the main reasons for return are too big or too small of a size, accounting for 22 and 30 % of all returns respectively.

According to another study, 58% of fashion items bought online are returned because of improper sizing, and 16% are returned explicitly because the shopper had purposefully bought two or more of the same items in different sizes. 


This means that on average, every 4 fashion items purchased, two of them are duplicates in different sizes. 

What if we told you there's ways to mitigate this? Jump to our last paragraph to discover how. 



Why is product return rate important for your ecommerce brand? 

 

If it wasn't clear enough, when paired with a free return policy, every product returned to you has a cost, usually a pretty staggering one. With a 10% profit margin, you might need to sell up to 3 items to breakeven on your cost of returns. 

These costs comes in 3 main shapes: 


1. Logistic Costs

Logistic costs include all of the costs associated with transporting the goods back to you. If you offer a free return policy, it means you will have to pay for each and every product that is returned to your warehouse. 

2. Warehouse Costs

Once the good is returned, you will need to inspect it. Inspections are meant to ensure the product is not defective (it might be a reason for return) and that it has not been used or ruined. 

3. Return Management & Automation costs

Of course, there is a cost for you to handle the returns themselves, such as ensuring you have the logistic infrastructure in place, as well as a customer support team to help you handle inbound return requests. If you work with a 3rd party logistic partner, and if your return volume is high enough, you might want to invest in automating your return process - which obviously comes at a cost.  This will save you admin time to handle returns, and likely also some operative costs associated with handling the returned goods. 

4. Re-marketing Costs

Re-marketing costs are associated with you making sure your product is ready to be sold again, which includes folding it and repackaging it. Of course, you will have to pay someone to do this work. 

3. Environmental Costs 

Finally, we come to the elephant in the room: the environmental impact of your returns. Especially for low quality, inexpensive fashion items, the costs associated with returns outmeasure the expected returns of re-marketing them. That is why every year we literally trash thousands of tons of brand new, perfectly sound items before they anyone even wore them. 

Can we agree that our planet really is not in the condition to take that toll? 

And yet... consumers demand that we offer them convenient return policies.

As a matter of fact, your customers are used to getting free returns, and if you do not offer them, one of your competitors surely does.

We do not seem to really be able to go back from here. As a matter of fact, returns rate are increasing globally across every industry year on year.  

However, there are ways to limit the amount of returns. Let's have a look at a couple of tactics and tools that can help you with this.

 

How can you lower your product return rate? 


At the end of the day, there are two things you can do to lower the impact of returns on your revenue: 

1. Manage returns more efficiently. 

Your customers expect a simple return process, and not having one will damage your business, from bad reviews to low customer retention. 

For this reason, you will need to deal with some level of returns.

So, having a clear, outspoken return strategy that is described in a precise and comprehensive way will only help you saving on support resources, benefitting your bottom line. 

When it comes to manage returns more efficiently, you have a few opportunities.

First, if you have brick and mortars location, you should allow shoppers to return items in one of your stores.

This way, not only you will save on logistics + warehouse costs, but you will also be able to convince the customer to exchange the item instead and offer extra service. 


Second, if you don't have physical locations where shoppers can return personally, then the ideal solution is allowing your users to post back to your warehouse plus use a return app to help you automating returns and update your inventory management system. 

Finally, a solution used by modern e-commerce only brands is to outsource inventory management and logistics entirely, including your returns. This can be done through a third party logistic partner (3PL). 

See if a third party logistic partner is something for you with this video 👇

 

 

 

 
2. Lower your return rate. 


Even though we have seen that some level of returns is to be expected and physiological, you should still do your best to limit the number of returns you get. You owe it to your Profit & Loss statement, as well as to the planet. 


Luckily, if you are determined to lower your returns, you have some pretty good chances you'll be able to get some good results. 

First, you need to make sure your users are as sure as possible about what they are buying: clear product descriptions, outspoken measurements, high quality content, 3D imagery, user generated content and reviews can help you do the job. 

In particular, especially when it comes to wearable products, such as clothing and footwear, your goal is to make the shopping experience as similar as possible as aa physical one. 

Showing the product on different models, with different sizes, and listing the models measurements as well as the item sizes can give a better feeling to your customers of how the item will fit them. 

Use Influencers 

I know, people rarely have the budget to use several models to showcase their collections. And this is where influencers and user generated content can come handy. 

We recommend creating strong connections with a few selected influencers that wear different sizes. This way, you can ship them entire new collections and ask them to create content for your website. In return, you can let them keep a few of their favourite styles for free.


It's a win-win situation, for both you and the influencer.

From your point of view, you get a lot of real life but professional quality content. Influencers imagery is more relatable compared to studio photos, and helps shape your brand personality.

Second, you get additional exposure, if the influencers decide to mention you in their content. On top of this, creating content this way can lower your production costs overall.

On the influencer side, they get to try a lot of different styles and choose which ones to keep, while they can use the pictures they create for you for their feeds (who doesn't like to show off some cool outfits on their instagram?). 

 

User generated content

On top of your influencer strategy, you should allow your users to leave reviews, and include a question about how the product fits. 

 



Use a size predictor software like Easysize.

There are plenty of review tools you can add to your webshop, to help users find the right size. 


If you use Shopify, the best one according to us is Easysize.

Easysize is a size prediction tool for your online store that helps you improve your store sales conversions and lower your shop's return rate with an automated solution.

It is very cost effective software that easily integrates to your Shopify webshop through a native app, and gives your customers an interactive experience to discover how your product fit, without need for body measurements. 

On top of this, it's very easy to customize to your products and affordable, especially for smaller stores with a few hundred sales per month. 


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