Returns are often costly for businesses but, in the age of online shopping, it is a necessity.
Consumers are more likely to make a purchase from stores that offer free returns, warranties, and exchanges. In fact, according to the data by Narvar, 69% of customers have been deterred from buying products online because they have to pay for return shipping and restocking fee. Nearly 100% would decide whether to make a purchase again from an online retailer based on how easy it is to return products.
It is unavoidable for any entrepreneur that wants to explore the e-commerce market.
Retailers Open New Online Stores
The number of online shoppers around the world has reached billions and, in the coming years, more are expected to buy their everyday needs over the internet. As a result, more retailers are opening digital platforms where customers can make purchases from the comforts of their own homes.
Even before the COVID-19 pandemic hit the United States, retailers were in a hurry to shift to selling goods online as foot traffic in their brick-and-mortar stores decreased.
However, online shopping presented a slew of new problems for businesses, particularly product returns.
Retailers Losing Money from Product Returns
Bigger businesses have returns and warranty management systems in place to oversee the process and decrease, as much as possible, the expenses associated with it. Return deliveries are costly, and they happen far too often.
In fact, in 2020, experts predict that return deliveries will cost $550 billion in the U.S. That is a 75.2% increase from the data in 2016.
The estimate does not even include other expenses, including restocking and inventory loss.
Why People Return Products
The majority of these return deliveries happens for legitimate reasons like receiving a defective or damaged product, wrong item, or wrong size. However, in many cases, customers place an order with the intent of returning the item.
In one survey, 41% of respondents admitted that they buy variations of one product they know they will send back to the retailer immediately after. This type of customer wants to recreate the traditional shopping experience of walking into a store and trying on different things in a fitting room.
Others are buying items, using it once, return it to the seller, and then ask for a refund. These customers may not have the money to buy the product. They take advantage of lenient policies, or they make sure that the item remains in the same condition they received it—even keeping the tag—so that they can send it back.
Consumers may not realize it, but both habits are costing retailers too much money. It got so bad that even Amazon, one of the biggest e-commerce platform in the world, started closing the accounts of customers who made too many returns. When the company opened Prime Wardrobe, an online clothes shopping destination, customers were only allowed a limited window for returns.
Returns Heading to Landfills
The process of returning a product has a cost. However, the product itself, when returned, may not go back to the marketplace to be sold to someone else.
Many of the products that are sent back to the seller go straight to landfills.
One study found that 5 billion pounds of waste are generated through returns each year. The process also contributes about 15 million metric tons of carbon dioxide to the atmosphere, exacerbating the effects of climate change. That is just in the U.S. It turns out, shopping online is not eco-friendly at all.
Part of the problem is how the products are sent back. When a pair of running shoes goes back with the lid open or without the laces, the retailer might find it easier to resell it to discounters or to toss it to the bin.
Returns are causing businesses to lose money, but environmentalists are also sounding the alarms. The manufacturing and transit of merchandise are already using finite resources, adding water/land/air pollution, and emitting greenhouse gases. Plus, the single-use packaging that doubles when a product is sent back. An unused product ending up in landfills, where they will remain for years, exacerbates the negative environmental impact of online shopping.
The problem of returns should be addressed by retailers immediately. There are reverse logistics platforms out there that will minimize the financial impact of product returns. However, consumers, too, should be mindful of their current shopping habits. Although sending back products to the seller is easy and, most of the time, free, the process generates a ton of waste that end up harming the environment.
Meta title: Negative Financial and Environmental Impacts of Product Returns
Meta desc: More consumers around the world are shopping online. This means that product returns will also increase which will lead to retailers and the environment suffering the consequences.