20 to 30% of items are sent back: Why charging for returns?

Written by Michaela Westberg | Oct 30, 2024 1:09:24 PM

Online shopping is incredibly convenient, allowing customers to browse and buy in just a few clicks. However, this ease has resulted in a significant rise in product returns, particularly in fashion retail, where 20–30% of items ordered online are sent back. While returns are essential for consumers, the hidden costs—both environmentally and economically—are often overlooked.

The trend of over-ordering

A key driver of high return rates is over-ordering. Many consumers purchase multiple sizes, colors, or styles, intending to return what doesn't suit them. This practice, though convenient, significantly contributes to the high volume of returns.

Environmental and economic costs

Returning products is far more complex than consumers realize:

Environmental impact: Many returns never make it back to the shelves. Some are resold at steep discounts, while others end up in landfills, contributing to waste and environmental degradation.

Economic impact: Handling returns—through sorting, cleaning, and repackaging—can often exceed the product's original value. This not only hurts the retailer's bottom line but also incurs significant logistical costs.

The push for consumer awareness

Despite the rising returns, many customers remain unaware of their impacts. Retailers can help by:

Offering clearer return policies.
Promoting mindful shopping, such as encouraging sizing guides and reading reviews before purchasing.

Charging for returns: A growing trend

With return rates soaring, more retailers are now charging for returns. In Europe, nearly 40% of retailers have introduced return fees, and this trend is expected to grow. Charging for returns encourages responsible shopping behavior as customers become more selective with their purchases.

An example of this success is NA-KD ,which implemented a simple return fee that helped reduce return rates and increase profit margins by 30-40 million SEK.

Customize the post-purchase experience

We know that jumping on the trend of charging all your customers for returns can feel daunting! A more strategic first step could be to segment your customer groups based on data from your CRM or other systems and customize your return policies and experience according to profitability and return behavior. You might want to charge your frequent returners for returns and offer them less flexible return options while providing your most profitable VIP customers with free returns and even home-pickup services.

Here are some key benefits of segmenting and personalizing the post-purchase experience:

Create more effective campaigns: Target specific customer groups with tailored offers and return policies.
Offer VIP customers express refunds and exchanges: Reward your top customers with premium return services to increase loyalty.
Take action against “serial returners”: Implement stricter return policies for customers who frequently abuse the return system, without affecting your loyal customer base.

By tailoring your return strategies, you can maximize profitability while enhancing customer satisfaction and retention.

Conclusion

As return rates remain high, driven mainly by over-ordering, the economic and environmental costs become untenable. Retailers address these challenges by charging for returns, promoting more responsible shopping habits, and ultimately working towards a more sustainable retail ecosystem.

Need help tailoring your return policy?

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