Out of the box solutions for reducing returns

Returns are a retail pain point where the pressure is growing – driven by an increase in e-commerce-related returns, heightened sustainability expectations amongst customers and growing government requirements.

On the legislative side, right-to-repair policies are advancing globally. Whilst this has mostly affected tech and automotive categories to date, there is a growing repair mindset driving more companies to rent or sell second-hand and refurbished products.

Two innovative solutions discussed at the NRF’s Big Show 2024 include using live streaming to improve e-commerce sales satisfaction and partnering with charities to reduce the waste created by returned products.

Accuracy of product information is key in reducing returns. In the US, retail returns average out at 36% of purchases according to Deb Weinswig, CEO of Coresight Research. By contrast, in China, returns have reduced to an average of only 9%. A big driver for this improvement according to Coresight is the enormous growth in live streaming – where customers have a greater opportunity to experience a digitally purchased product on a more three-dimensional level – in the hands of an influencer or other brand representative. The Coresight data shows in China returns drop by 50% when they are purchased via livestream.

Customers like to see a product demonstrated several times according to Coresight, and in China, they also expect to access live streaming at their convenience – ideally 24/7 or at least for a 3 to 6-hour block duration of time. Whilst all of this comes at an intense resource cost, the benefit is a heavily reduced returns rate.

At the Big Show, one innovative start-up that is solving this is Estreamly.com. Estreamly allows retailers to easily create and stream shoppable videos live to websites, blogs, social media and third-party channels. The company boasts that conversion rates on live streams are 15% compared to only 9% for video.

LiquiDonate an NRF Innovation Lab start-up, allows retailers to channel unsellable inventory to a network of non-profits. Powered by AI, the company uses fast, donation-matching software to identify matching non-profits who are asking for products. They can even route returns directly from the customer to a non-profit saving the retailer money. They allow retailers to quickly offload as much product as needed – boxes, pallets or truckloads. Whilst they aren’t in Australia yet, retailers selling in the US can use the LiquiDonate service which can create significant cost savings on offshore returns.

What other returns trends are we seeing globally?

• Retailers are providing better, clearer product information on their digital selling channels.
• Technology improvements such as the use of AI, size chart optimisation and more widespread use of product ratings have helped drive down returns.
• On the consumer side, increased awareness of the problem has helped to reduce return rates.
• Destruction of returns is reducing, with returns either repackaged and sold again, sold as second-hand items or donated. There are moves towards legislation around this in some locations.
• Many retailers are considering dropping their free return policies. In the Netherlands, there is an increase in online shops that charge return costs – some a symbolic amount, others the full price. This is an enormous step in raising awareness that both delivery and returns are not free of charge.
• In some countries, producers and sellers are now required to take part in Extended Producer Responsibility.