Product returns are a necessary evil for retailers; shoppers won’t buy without them, but shipping and return-to-stock costs have a major impact on revenue. Experts estimate the average return costs a retailer between 15 percent to 30 percent of the original purchase price, and cumulatively, returns cost retailers $550 billion every year.
In our new PowerReviews study, “Returns in Retail in 2021,” based on insights from 7,688 U.S. consumers in June 2021, we found a key digital strategy can help significantly reduce the rate of returns.
The report reveals that when shoppers have access to ratings and reviews, it significantly reduces their likelihood of returning an item. In fact, two in three shoppers said they would be less likely to return a product if they had been able to view user-submitted reviews, Q&A, or images and video prior to their purchase.
With 88 percent of consumers reporting they make returns at least “occasionally,” retailers need to take note as this aligns with industry reporting that returns were up 70 percent year-over-year in 2020.
Twenty percent of consumers surveyed say they return items bought online more often than those purchased in-store, which has significant implications for retailers as they seek to optimize profitability in their omnichannel sales strategies.
We also looked at the most common categories of product returns. At 88 percent, clothing was far and away the most common type of product people returned, followed by shoes (44 percent), electronics (43 percent), home and garden (24 percent), health and beauty (21 percent), toys (19 percent), appliances (18 percent) and other products.
Incidentally, these top product categories mirror the product categories where consumers most value user-generated images, including clothing (78 percent), electronics (70 percent), home and garden (62 percent) and health and beauty (60 percent). By generating more images and videos from customers, retailers can help lower return rates for products in these categories.
Seventy percent of consumers cited the reason for return was that the item didn’t fit. Bracketing — when consumers buy multiple sizes of the same item — is a big hurdle for retailers. This behavior is leading to higher return rates, driving up costs and tying up inventory that could otherwise be sold. Ratings and reviews can help in this area; retailers can add size and fit information to product reviews to help shoppers make more informed purchasing decisions.
Our study found that free shipping and returns with free shipping and free returns topped the list of buyer considerations. At 96 percent, nearly all shoppers consider free shipping to be important. At 79 percent, free returns were the second most important factor. Fast shipping came in at 74 percent, buy online, return in-store was 48 percent, as was buy online, pick up in-store.
Interestingly, 83 percent of consumers with household income over $100,000 said free returns were important to them as well. This means that luxury retailers catering to higher-income shoppers should consider implementing a free returns policy. It’s possible that high-income households have more discretionary income to spend on nice-to-have items, and they want the option to return the item if they change their mind. Conversely, lower-income households could be primarily online shopping for necessities that they don’t plan on returning.
Ratings and reviews also incorporate another critical element that can also reduce return rates — the consumer insight in the actual reviews themselves. By treating ratings and reviews as a consumer insight channel, retailers and brands can get to the bottom of why customers feel compelled to return items in the first place.
Instead of treating ratings and reviews purely as an online conversion mechanism, it’s worthwhile thinking about how you can further maximize its potential. Display them in a way that facilitates in-depth and accurate buyer research prior to purchase, and then extensively analyze the information they contain to drive impactful product improvements.
By uncovering the connection between consumer ratings and reviews and product satisfaction and return rates, this user-generated content strategy is showing it punches more than its weight, providing ancillary value in mitigating returns — something retailers should duly consider as we head into the post-holiday return season.
Andrew Smith is vice president of marketing for PowerReviews, a conversion-first UGC vendor.