The pandemic sparked a surge in e-commerce sales, but it also resulted in a massive surge in product returns. The U.S. Department of Commerce estimates total e-commerce sales in 2020 to be $ 788 billion, up 32.4 percent from 2019.
The number of ecommerce parcels returned in the U.S. in 2020 rose 70 percent from 2019, according to Narvar, a logistics platform provider for retailers that represents goods valued at around $ 102 billion.
The operational and financial problems this created for web-only and omnichannel retailers motivated many to put in place a refund policy on certain items that would allow consumers to keep the item if the cost of returning it was too high. While retailers were heavily promoting the policy in January 2021 – when vacation returns are at their highest – refundable refunds remain in place for many larger sellers, including Amazon, Walmart, and Target.
Amazon and Walmart both use artificial intelligence to decide whether it makes good business sense to accept a return. These dealers can cover the costs. For smaller merchants, however, refundable refunds are a recipe for financial disaster.
Return without return
For inexpensive or bulky items, it is often cheaper to refund the purchase price and let customers keep the products. However, this results in fraudulent returns to the balloon. Dishonest consumers could determine which products to keep, pretend to return those items, and receive a refund.
The US fraudulent returns in 2020 were approximately 7.5 percent ($ 7.7 billion) from online purchases and 6 percent ($ 25.3 billion) from all online and in-store purchases.
Most retailers consider returns a business expense. But the cost is rising with the rise in free returns for returns and the work of replenishment.
Consulting firm Incisiv surveyed around 100 retailers and 2,500 US consumers. The following report, “Industry State Report 2021: Retail Returns,” published in partnership with Newmine, a returns management company, described the results. Less than half of the retailers surveyed track the financial impact of returns. Consultants and environmentalists are encouraging retailers to take on a more assertive role as most returns are avoidable. For example, wrong sizes and colors and generally poor quality are the main reasons for clothing returns.
Americans return about 3.5 billion products annually, and £ 5 billion of returned goods find their way to U.S. landfills, according to Optoro, helping retailers process returns. This creates approximately 15 million tons of CO2, excluding the air pollution from the trucks picking up returns and delivering them to the retailer.
Therefore, one benefit of refundable refunds is that the process does not generate any CO2. However, there are other ways to mitigate the effects. Omnichannel retailers can encourage consumers to shop online and return to the store. Other retailers could work with partners who offer returns at suitable locations to reduce costs and carbon emissions.
For example, Happy Returns, a returns management company, announced an agreement with FedEx last October to offer Happy Returns service in more than 2,000 FedEx branches, quadrupling the number of Happy Returns locations. Online Happy Returns reseller shoppers can return products in person at most FedEx locations without a box or label for an instant refund or exchange.
That process is that. Buyers initiate returns on the retailer’s website or from Happy Returns and generate a QR code. Buyers then take the items and QR code to a FedEx office to complete the return. FedEx uses Happy Returns technology to combine items from multiple retailers into a single shipment, reducing process costs for participating retailers and reducing environmental impact.
FedEx sends the aggregated shipments to one of Happy Returns’ two regional processing centers, which accept, sort and process mixed returns.