Mobile Commerce

The Sad State Of ECommerce And Online Returns

While many retailers mistakenly believe that a successful eCommerce strategy simply mimics what works in a brick-and-mortar store, there are just some places where the two experiences don’t match up. For example, while beacons are helping in-store marketing campaigns close the gap, eCommerce usually has the leg up when it comes to leveraging consumer data toward conversions.

However, there is one place online merchants haven’t been able to address like their in-store counterparts have: returns.

According to a recent survey conducted by HRC Advisory, online returns still present one of the biggest obstacles for eCommerce retailers looking to optimize supply chains. The survey examined the opinions of 20 executives from retailers in electronics, food, fashion and health to find that 95 percent of respondents identified online returns and their high associated costs as major roadblocks to innovation.

“Today’s consumer is driven by an ‘I want it now’ mentality, yet many retailers are still struggling to deliver,” Farla Efros, president of HRC Advisory, said in a press release. “Competing with pure-play eCommerce retailers, and accommodating the multitude of new fulfillment options, requires a significant increase in supply chain flexibility and better integration between the physical store and eCommerce network. Without these changes, traditional retailers will not be able to execute a truly customer-centric model.”

Processing returns on a small percentage of online orders might be plausible for the average online merchants, but the HRC survey found that returns can sometimes comprise 30 percent of all transactions. The manner with which each product is returned can also affect the overall impact on retailers’ bottom lines. For example, returns that are shipped to stores that don’t stock those particular items or remote fulfillment centers end up costing retailers more 85 percent of the time.

Online returns are clearly not benefiting the retailer, but are customers faring any better when it comes to sending back an item they purchased without seeing it or trying it on? The short answer is no. According to a 2014 Internet Retailer study, only 10 percent of online businesses offer free shipping for returns, which means customers are stuck not only with a product they no longer want, but they have to open their wallets again to send it back for a refund or exchange.

So if online returns aren’t working for neither retailers nor customers, is there a middle ground both sides can reach to eliminate all the friction and costs?

“One solution … is to have online purchases shipped to an actual store for pickup,” Efros wrote in a commentary on the HRC survey. “When a consumer comes into the store to pick up their product, they are likely to touch and feel the fabric, try the garment on to test size and fit, or examine how the product actually works, all of which can reduce return rates to a more acceptable 15 percent.”

However, what Efros is recommending is only a temporary solution to a permanent problem. The move toward an omnichannel shopping experience with the customer at the center has induced a paradigm shift in retail, and though it might be a painful process, achieving a supply chain that can facilitate both in-store and online operations is critical in the coming years. Even though only 53 percent of retailers surveyed claimed that their inventory systems were integrated to the point where they could give customers an accurate quote about which locations held which products, retailers that don’t press for smoother logistics for both B&M and eCommerce aren’t keeping up with the times.

Whether the solution for retailers is to offer free return shipping to coax consumers to their side or double down on supply chain innovation, the first merchant to do so could set a trend others follow.



The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.