In the dynamic world of retail, the issue of product returns remains a significant challenge. Last year, over 23 million* items were returned in Sweden, with physical stores experiencing an average return rate of 8-10%, significantly lower than the 20-40% faced by e-commerce. This blog explores the reasons behind returns and offers insights on how businesses can reduce them.
E-commerce not only contends with high return rates but also needs help to resell products at their original prices. This often leads to discounted offerings, resulting in financial losses and unsustainable business practices.
Returns are a downside for all global e-commerce players, quickly diminishing profit margins and conversion rates. As e-commerce continues to grow, return rates are also expected to rise unless measures are taken to mitigate them.
While returns are considered a natural cost of doing business, a deep understanding of customer behavior and return causes can help minimize overall return numbers. Consumers often view the option to return as part of the online shopping experience, but with the proper knowledge and expertise, businesses can significantly reduce return rates.
The concept of "social proof", or social capital, is an innate instinct deeply rooted in the human psyche. People will always follow the actions or examples of others. An e-commerce store with many positive reviews on a product will likely receive more orders than another with a similar product but fewer appreciative reviews. This is because customers perceive the former as both popular and credible. Social capital in the online shopping experience can manifest through interactions on social media, user testimonials, case studies, product ratings, reviews, and recommendations from well-known personalities.
A study indicates that 92.4%* rely on online reviews to make purchase decisions. Detailed reviews addressing product quality and usage significantly increase sales and fewer returns.
That customers receive incorrect products or a damaged product is rare, but it can happen. However, it should only occur occasionally, as it is a sign that you have a more significant problem. If you receive many reports of logistical issues, you must conduct an immediate investigation and try to address the root cause of the problem.
Therefore, we recommend using a tracking system to document any logistical errors. The tracking system should also enable customers to quickly bring any shipping or delivered product issues to your attention.
Returns are undoubtedly one of the most significant challenges for e-commerce businesses. However, even though returns are inevitable in operations, they do not have to spell disaster for your company. Analyzing and understanding customer behaviour is crucial if you want to succeed in reducing the number of returns. Use the advice and tools described above to address the most common reasons for returns.
*Transportföretagen Paketindex 2023