How Returns Can Kill Your Online Store’s Profitability (and How to Avoid It)

Online returns are surging, and e-commerce retailers need a strategy to stay profitable.

If you run an e-commerce website, you know that returns are an inevitable part of doing business. This can add up to significant costs and could be killing your profitability, especially if you’re not prepared to handle the returns in an efficient way. Streamlining returns through an effective reverse logistics platform can help you maintain profitability and keep up with competitors.

Facts About Online Returns

If you run a brick-and-mortar operation where people come into your store to purchase goods, you experience a product return rate of around 10%. By contrast, e-commerce sites experience average return rates that are double that at 20%, and in some industries are even higher. Over 40% of people who shop online do so with the explicit intent to return some or all the items they buy, according to data compiled from studies in 2017 and 2018.

Whether people buy more than they need so they can compare multiple products in person (returning the ones they don’t like), because they’re not sure what size will fit, or because they’re trying to meet a minimum order to achieve free shipping, online retailers must account for returns. Other data show that 7 in 10 people are deterred from buying something online if they have to pay return shipping or restocking fees, so offering easy returns can differentiate you from competitors and increase repeat shoppers.

How Returns Can Kill Profitability

When a customer orders more than they wanted and returns an item, what happens varies widely from one retailer to another. Without reverse logistics, items may never be restocked or resold, take up valuable warehouse space, or have to be sold at clearance prices much later. After refunding the entire purchase price to the consumer that’s a lot of lost revenue.

How to Make Returns a Competitive Advantage

Companies that are most successful with the returns process are those that have a good system in place. Putting as much effort into the reverse logistics process as you put into your forward logistics processes can turn profitability around. Some tips to keep returns from severely impacting the bottom line include:

  • Having a clear return policy that customers know up front, and only accepting returns that meet your policy guidelines
  • Providing good information online about every product you sell, including high quality photos and videos, dimensions/measurements, size guides, and customer feedback on things like the size and fit of apparel or shoes
  • Allowing people to buy online and return in store
  • Pre-printing labels and partnering with shipping companies (UPS, FedEx) to drop off returns at their locations
  • Automating the process to speed up refunds, create return materials authorizations, track packages that come back and quickly restock items that can be resold

Talk to ReverseLogix today about how our automated platform can track and manage all your returns and increase your online store’s profitability.