Don’t bask in the afterglow of all those holiday receipts just yet. Because, well … returns.
Inaugural digital-first winter gifting season that it was, merchants and payments processors the world over are looking over their collective shoulder, waiting for a deluge of the unwanted.
In a new PYMNTS report, Online Ordering’s Return Round Trip: Do Discounts Change Consumers’ Minds About Returning Holiday Purchases? researchers surveyed a census-balanced panel of nearly 2,300 U.S. consumers to help formulate strategies for dealing with holiday returns.
Among other things, PYMNTS researchers found discounts as low as 5 percent “could persuade 39 percent of consumers ready to return an item to keep it, 10 percent boosts that to 45 percent, saving merchants the cost of returning, restocking and remerchandising that product. A discount of 25 percent to 30 percent would be enough to persuade consumers inclined to return an item due to quality concerns to also change their minds.”
Considering that “Eighty-nine percent of all 2020 holiday shoppers made at least one of their seasonal purchases online, with half of all shoppers completing all of their holiday purchases without ever setting foot in a brick-and-mortar store,” Online Ordering’s Return Round Trip adds the fact that “Sixty-three percent of all consumers who made purchases this holiday season have either already returned” items, or expect to. Which means get ready for returns.
The Island Of Misfit Buys
If one thing jumps out of the findings in Online Ordering’s Return Round Trip, it’s the role that order errors are playing, particularly in light of anticipated digital-first purchasing accuracy.
“Fifty-six percent of all consumers who plan to return their holiday purchases cite order mistakes — accidentally ordering an item in the wrong size or color — as the main reason for the return. Product quality is a distant second at 30 percent,” per the new report. “The third- and fourth-most common reasons that consumers might return holiday purchases relate to buyers’ remorse: They either simply no longer want the items or have experienced shipping issues, such as late arrivals. Twenty-two percent and 21 percent of all holiday shoppers who would be willing to return their purchases and cite these reasons, respectively.”
Shipping snags and superior pricing from competitors also contributed to return stats.
Discounts and store/site credits are one way that merchants are dealing with the issue. Noting, “The discount needed to sway consumers to keep unwanted items changes based on the reason for the return,” Online Ordering’s Return Round Trip states, “Consumers who received items late are more willing to keep purchases when offered discounts than those who received an item that was the wrong color or size or deemed low quality. A 5 percent discount is enough to motivate 51 percent of customers to keep items that were delivered late but retailers would have to offer discounts of 30 percent to keep 51 percent of customers from returning products when there were order mistakes.”
Incidentally, PYMNTS found that a 30 percent discount “would also convince 60 percent of customers to keep low-quality items.” Makes 30 percent sound (slightly) less outlandish.
When Returns Aren’t Worth It
Emerging from a time when controlling costs was about the only thing businesses could do — as COVID-era sales were nonexistent for many — the price of returns can be just too high.
“The expense of handling returns can be costly for merchants, with some opting to refund the entire purchase price of an item rather than process a return. Returns cost businesses roughly 10 percent of their total supply chain costs, on average,” according to Online Ordering’s Return Round Trip: Do Discounts Change Consumers’ Minds About Returning Holiday Purchases?
The study adds, “Consumers can be persuaded to reconsider returning items if offered discounts of as low as 5 percent. Offering discounts higher than 10 percent does little to increase the portion of consumers who would take that option, in fact.”
Millennials (bridge and otherwise) like discounts for late deliveries more than most. “Our research shows that 72 percent and 74 of consumers in these age groups, respectively, would consider shopping with merchants who offer such discounts,” per the new study.