Are Online Retailers Missing Something Obvious?

While online retail as an industry is growing, many online retailers are struggling to grow and capture their fair share of that growth. In a recent study of online retailers conducted by Forrester and the National Retail Federation, 12 percent of retailers experienced flat or declining revenues in the last year. To find pockets of growth, retailers have aggressively invested in everything from customer acquisition to faster shipping. However, there's one often overlooked opportunity that retailers rarely mention: returns, specifically enabling easier returns than ever.

For years, most retailers have accepted their web store’s returns in physical stores, but what’s less common but extremely attractive to shoppers is the ability to accept any return anywhere and to get your money back quickly. Amazon.com has received some attention for this following an agreement with Kohl’s to enable the department store chain to accept Amazon returns. Something similar is likely to follow with Whole Foods.

I recently worked with a small Los Angeles-based startup called Happy Returns, which helps manage e-commerce returns and was founded by former Nordstrom executives, to gather consumer data on attitudes toward returns and online shopping. The survey covered the opinions of 1,800 online shoppers who had also purchased fashion items, and was fielded in July 2017. What the survey revealed is not only that e-commerce pioneers like Zappos had it right a long time ago with its aggressive approach to free returns, but it also showed there's still opportunity for even more creativity in the returns process than there currently exists.

Here are some highlights from the study which help to shed light on what retailers gain by enabling in-store returns for online orders:

• Shoppers hate the returns process more than anything in e-commerce. When asked their least favorite part of the e-commerce experience, shoppers overwhelmingly cited returns. Seventy-three percent of survey respondents said returns were their least favorite part of shopping online. In contrast, 45 percent cited opening a package as their favorite part, and another 32 percent said they liked researching purchases online.
• The fear of returns holds back e-commerce. Twenty-eight percent of survey respondents said they shop less online than they would otherwise because they don’t want to deal with the possibility of returns. And there are many cases where shoppers are disappointed with what they receive, but they nonetheless don’t bother returning the items, which is what more than one-third of shoppers said they did. This is particularly pronounced with millennials, who not only are more likely to keep items without ever using them, but are also more likely churn away from a retailer entirely. Forty-six percent of shoppers under the age of 30 said they just don’t shop again with a retailer after receiving an order that disappoints them.
• Consumers categorically prefer to makes returns in-store. Forty-one percent of survey respondents said they preferred to return in-store compared to 13 percent of respondents who said they preferred mailing back online returns. And again, younger consumers were even more likely to want to return items to physical stores than older customers. Fifty-one percent of shoppers under 30 said they preferred to return items to stores vs. 7 percent who said they wanted to return items by mail.
• Any nearby store should be a returns depot. Shoppers often prefer to avoid long drives for returns and would like to have their returns processed nearby instead. In fact, about one-third of respondents said they wished they could return online purchases to a nearby store like a grocery store. Forty-two percent of shoppers under 30 agreed to the same statement.
• Printing and packaging are problems with returns. The process of printing out a return label and repackaging an item (few retailers provide return labels or even return packaging) is a source of frustration for many, and likely why in-store returns are often preferable. Forty-four percent of shoppers under 30 say that it’s a hassle to print out return labels. Forty percent of all respondents said they found repackaging items for mailing to be a hassle as well.
• A frictionless return has a specific definition. When asked to describe the perfect returns experience, shoppers said they wanted the return to be free, they want an immediate refund, they want to be able to return an item without a receipt, and they want to return in-store (i.e., any store nearby). Target’s store returns are a good example to follow. The retailer's customers don't need to bring in a receipt; rather, Target can find a transaction based on the shopper’s credit card.

While so many retailers look for ways to grow sales, this data suggests that a much more flexible, local returns solution that can refund shoppers immediately is an opportunity for retailers to both acquire new customers and retain existing ones. Printing out returns labels and boxing items for returns are services that shoppers want. Consider this and you may unlock some untapped potential in your online retail operation.

Sucharita Mulpuru is vice president and principal analyst, Forrester Research.