How Retailers are Managing Returns During the Pandemic

By: Tim Kane, Retail Industry Consultant, Zebra Technologies

Consumers spent over $800 billion shopping online last year, leading to an overwhelming amount of returns that left retailers scrambling[1]. Returns, which have always been a challenge for retailers, have continued to increase as a result of the skyrocketing growth of online shopping and alternative shopping options. As more shoppers continue to purchase items online for both convenience and safety purposes, retailers are examining new returns policies that are sustainable and easy to manage long term.

The “Keep It” Returns Policy
In some instances, retailers have been seeing return rates for items purchased online as high as 40%[2]. For stores already struggling to keep up with today’s omnichannel environment, this can be an overwhelming task. At the start of the pandemic, the volume of returns retailers received was so large, some businesses were opting to let customers keep their unwanted items rather than mailing them back. This is not an ideal long-term solution for most retailers as online shopping continues to be a mainstay shopping option.

One of the biggest reasons these pre-pandemic return policies are not sustainable is the cost of returned goods sent back to the distribution center (DC). Shipping back to a DC increases the cost of the item and reduces margin around any sales. For retailers with physical storefronts, returns can be managed through a variety of options. Some stores may opt to mark down returned items, therefore salvaging some of the product’s margin. As stores continue to re-open, and more shoppers return to purchasing items in person, requiring customers to return their items to a brick-and-mortar location also increases the possibility of them purchasing additional items. Allowing them to return unwanted goods via mail eliminates the likelihood of making up lost profits and the potential for additional purchases after making their return.

Emergence of Returns Management Companies
The impact of COVID-19 on the retail industry opened up a new market for companies that focus solely on returns. These businesses have seized the opportunity to obtain relatively inexpensive real estate in shopping malls where they can use storefronts to process returns and get items back on retail shelves. The benefit of these returns companies is that they can process returns more efficiently than a retailer, thus mitigating some of the returns expense for stores. Outsourcing the returns process may not be a realistic option for smaller retailers, but for larger ones this can be the perfect solution for managing returns.

Looking Forward
Coming out of the pandemic, retailers will need to substantially increase their technology investments to make the returns process as foolproof as possible. Certain categories are especially problematic – shoes being a good example as sizing is so inconsistent across manufacturers that four pairs of shoes may come back for every one that is sold. 

One type of technology that retailers are beginning to depend on more and implement in their operations is radio frequency identification (RFID). RFID and other hardware and software solutions  improve the accuracy of returns and equip retailers with the ability to develop in-house returns processes that deliver an overall better customer experience. Unlike traditional returns that require store associates to manually search for price tags and match them to a receipt, RFID readers allow stores to quickly and accurately process returns at the counter, even if the customer can’t present a receipt and the purchase can’t be located in the system via the customer’s credit or loyalty card. Retailers can also develop a process that allows the customer to place the returned item on a counter where the RFID reader is embedded or suspended above and matches the scanned RFID tag to the receipt. 

In addition to improving the speed of the returns process and helping increase inventory accuracy, building RFID into a store’s operations can help retailers identify when someone is trying to return a stolen or counterfeit item. Counterfeiting has been a growing challenge for retailers in recent years and in most cases, is almost impossible for the average store associate to identify. There have also been more attempts at returning stolen merchandise for store credit in recent months. With RFID, retailers can prove whether an item was indeed sold at one of their stores and help catch fraudulent returns.  

Even after the pandemic is long over, returns will still continue to plague retailers and present an ongoing challenge that will need to be addressed. Fortunately, technology has evolved in a significant way in the last few years, enabling retailers to find the right solution to support and improve their operations.

To learn more about retail solutions that are helping stores manage returns and keep up with growing e-commerce demands, click here.

[1] “A decade in review: Ecommerce sales vs. retail sales 2007‑2020,” DigitalCommerce 360, 2021. https://www.digitalcommerce360.com/article/e-commerce-sales-retail-sales-ten-year-review/

[2] “Online Retail’s Hidden Post-Covid Cost: Returns,” Forbes, 2021. https://www.forbes.com/sites/gregpetro/2021/03/02/online-retails-hidden-post-covid-cost-returns/?sh=39d8ad747002