High Returns don’t just hurt the merchant
The problem of high returns explained….
Free shipping and returns have become commonplace in the e-commerce industry, increasing 95% in the last 5 years. The aim is to help consumers overcome their hesitations before purchasing. Whilst free and frequent returns aid the customer, it comes with a significant detriment to the environment and merchants. As of 2020 30% of all products ordered online are returned compared to just 9% in retail stores , this adds up to around 3 billion items returned each year. Coupled with the trend of increasing online shopping, tripling in the last 5 years, these issues are likely to become ever more present.
Product returns in ecommerce are principally viewed as a drain on company resources and capital, the damage they serve goes deeper. Particularly with the impact they have on the environment and the long -term ramification as a result of an increasing in e-commerce sales.
This raises about high product returns;
- How exactly does this impact the environment?
- How does this strain your company?
and MOST importantly ….
3. What can be done to fix it?
So how do returns impact the environment?
Firstly, lets discuss the environmental effect of product returns. The principal issue for the environment is the double transportation of good. Returns lead to increased petrol usage and greenhouse gas emissions through air or road freight or international shipping, without the end result customer value. Shockingly, US generates 15 million tons of carbon emissions due to product returns. Naturally, the next issue is the packaging. All shipped products have many layers of packaging, often with unrecycled, non recyclable and non-biodegradable materials. This generates tons upon tons of waste every year, once more without the gain for the consumer or merchant.
Furthermore, often the products returned are not fit for resale, generating even more unnecessary and detrimental waste. Studies show that 51% of shoppers consciously overbuy online with the intention of returning some of the goods. What consumers don’t realise in doing so is that the products are more often destroyed than resold to avoid the costs of transports repackaging and storage. As a result of higher sales, many companies engage in overproduction that results in further landfill or incineration. Therefore, the effect is a double edged sword, high returns create more products sent to landfill to avoid the firm’s cost for returns, and higher sales due to return lead to overproduction which ultimately ends in landfill as well. Yikes!
What does the problem of high product return rates mean for your company?
As a company you suffer a net loss on the product from the cost of transportation for returns as well as the repackaging, storage, without the value of the sale. As just highlighted, it can also lead to costly over purchasing of stocks creating higher inventory costs. For companies involved in the furnishing industry the loss form returns is even greater due to the expense of shipping. As a matter of fact, research has shown that around 50% of furniture ordered online is returned. Products returned then may not be applicable for resale, thus a merchant faces an even higher loss on the balance sheet as the product becomes a scrappage cost. Ultimately, it is a waste of company resources, time at the expense of both the firm and the environment.
What can be done to fix it?
The main cause of customer returns is through customer hesitation and lack of knowledge about a product. With free and affordable returns the customers are inclined to buy several options or buy with the sole intention of viewing and learning more of the items rather than buying. Creating more detailed listings, accurate product information and more pictures can help but often is not enough to inspire a purchase.
With Augmented Reality models customers are able to view products in 3D, 360 degree view and to scale. They can try products on themselves or in their room, understand better dimensions, colour and texture. Most importantly customers can view the product in the desired setting whether buying a new sofa or trying a new pair of glasses. It allows customers to “try before you buy” from the comfort of your home and increases consumer confidence in purchasing. AR models don’t just reduce returns but provide a higher sales convergence rate streamlining the sales process for merchants.
For large size and big ticket items the gain is more significant to avoid costly re-shipping and increase of high-margin sales. Macy’s implemented AR models for furniture return rates dropped by around 70%.
ARspar provides these models with built-in payment software taking models the next step further and creating sales directly from the model viewer. With ARspar these models are directly integrated into a merchants e-commerce platform. Have a look at how this works in practice here.
Check ARspar technologies to see how we have provided a solution to the company loss and impact of returns with integrated AR models for your e-commerce platform.
Help your customers make better purchasing decisions and protect the environment in the process!
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