With the rapid and nonstop development of online shopping, more returns and after-sales problems emerge. With different kinds of shopping procedures from the traditional offline one, the returns become different and somehow more complicated too.
Especially after COVID-19 and inflation burst out, there are more things for both consumers and retailers to consider before purchasing. Things like groceries, households, and necessary life supplies have become the main demands for consumers, meanwhile, other categories with fewer necessities in daily lives gain less attention. This also makes retailers struggle with more ways to bring their products back into the customers’ sights. Thus, many retailers come up with ways to provide more favorable return and exchange policies.
This battered macro environment has also greatly changed the return policy in the online market. More free and discounted returns emerged. As it is shown in the data, more than 39% of online merchants provide a free return policy to their customers, which is a massive increase from 21% in 2018. The appearance of a “return policy” also has a double impact.
On the good side, it can save a lot of production resources. Increasing unnecessary big sale events and promotions sometimes can be a waste and they are always considered a huge drain on the environment. However, on the other hand, it massively increases the cost of the retailers. In a survey conducted in 2020 in the US, nearly 40% of the customers who are aged between 21 to 44 returned with a firm invention. Let’s take a look at the UK, around 10% of the customers return their products (mostly clothes) right after they take a photo of it and post it on their social media. There are also a number of customers who choose to conduct a “friendly fraud” – that is to “threaten” the retailers that they will return or exchange the products by claiming the products they received is below their expectation – to get a little extra cashback.
With more customers choosing to return, the return cost in extra packaging and transport is getting higher. Retailers are bearing a heavier burden at this additional cost. A survey also reveals the return rate of different online products. Auto parts have the highest return rate with an average of 19.4%. The next highest is apparel with a 12.2% average return rate. This number is followed by home improvement and life supplies and housewares which both have an average return rate of 11.5%. What’s more, the return rate of last year was 50% – compared to 39% this year – which shows a decline in the number.
CouponBirds – a leading online coupon-providing site – interviewed 2,498 online retailers and some customers about their thoughts and practices on this phenomenon. The most frequently used reason for the customers returning is products “damaged or broken”, which occupied 80% of the result. Other reasons for returns due to the problem of the product itself include “product of poor value or quality” (occupies 8%) and “product arriving late” (occupies 7%). The other reasons such as “product does not match its description” or just “does not like the product” also occupy a big part for 64% and 37% separately. However, the retailers facing the increasing – not only return rate but also return cost – have also come up with other solutions. 73% of retailers choose to offer a small amount of cashback to avoid unnecessary returns and exchanges. However, there are also 11% of them who choose to do nothing, neither providing free returns nor other kinds of cashback.
According to what this survey reveals, for every $100 of the products the retailers receive, retailers will lose on average $10.30. “Return frauds” occupied a great part of it, such as buying some products without having the intention of keeping them in the beginning, or returning fake products without a receipt, fake or stolen products. The customers always call it “friendly fraud” to claim that they have no unduly malicious intentions but are just being a little selfish for themselves. At the same time, the retailers tend to call it “chargeback fraud” or just “fraud”, as they don’t think it would be friendly for them and they always have to give up a little profit to get over it. To prevent this, there are tools like Bolt and Chargeback Gurus that can help retailers to minimize their “friendly fraud” losses. Also, the online retail giant company Amazon requires fulfillment by retailers of fashion products to offer free returns at their own expense.
In the USA, there don’t appear to be any national or federal laws that impact returns and refunds, only that these policies should be clearly listed in some kinds of retailers for consumers. Different parts of the world have their unique return policies. For instance, there are laws in the European Union that allow customers to return items for no reason within 14 days of purchase and get a full refund. In China, the no-reason-return policy is within 7 days. However in New Zealand, the Consumer Guarantee Act made a rule that sales are final and that businesses don’t have to give you a refund or exchange if you have changed your mind, your circumstances change, or you find cheaper products elsewhere.
The always-changing return policies and continuing deteriorating macroeconomic environment make most people in online shopping confused. Adjustments should also be made on both sides. It is a long way for every element to improve. Is it a dilemma? Maybe. But will it be a dilemma forever? I don’t think so. Perfect rules always take some time to be fit. With efforts made by all parties, we will surely figure out the best way out.