In the dynamic retail landscape, U.S. retailers are adopting innovative “keep it” or “returnless” policies, encouraging customers to retain items when return costs surpass their value. This strategic move, beyond mere cost-cutting, aims to optimize profitability during the holiday returns surge. In collaboration with 4xPip, our exploration aligns with empowering businesses, offering insights into how retailers are reshaping their returns strategies for sustained profitability. Stay tuned for a concise analysis of the evolving dynamics in U.S. retailers’ new returns approach.
The Growing Trend:
As holiday shoppers embark on the annual ritual of returning items post-Black Friday and Cyber Monday, a notable trend is reshaping the retail landscape. More U.S. retailers are steering away from the traditional approach of accepting returns and, instead, encouraging customers to keep items that prove more expensive to return than their actual value. According to a survey by returns services firm goTRG, 59% of retailers have adopted these “returnless” policies this year, a significant surge from the 26% reported last year. This shift, fueled by the desire to cut excess costs, is underpinned by technological advancements that allow retailers to identify items where the return costs far outweigh their original value. As the holiday season unfolds, the implications of this strategy are becoming increasingly evident, shaping the dynamics of post-holiday retail operations.
Understanding the scale of returns during the holiday season is crucial in appreciating why retailers are actively reshaping their strategies. Optoro predicts that U.S. shoppers are set to return a staggering $173 billion worth of holiday purchases this year, marking a 28% increase from the previous year. This surge in returns is not merely a logistical challenge; it represents a significant financial strain on retailers. The average return costs retailers approximately $30 per item, encompassing expenses related to transportation, sorting, and resale. This financial burden, coupled with the anticipation of returns starting the day after Black Friday and extending into February, prompts retailers to explore alternative strategies, such as “returnless” policies, to alleviate the impact on their bottom line.
The Financial Impact:
Returns have long been a pain point for retailers, both in terms of logistical challenges and financial implications. The financial impact of returns is substantial, as the traditional process involves transporting, sorting, and often reselling items at a discounted rate. With almost 90% of retailers revising various policies this year, it’s evident that the financial strain is a catalyst for strategic changes. The typical return costs of $30 per item accumulate quickly, draining profits and highlighting the need for innovative solutions. This financial impact is further exacerbated during the holiday season, where returns spike significantly. For retailers, striking a balance between customer satisfaction and financial prudence becomes paramount, prompting the exploration of alternative approaches like “keep it” policies.
In response to the escalating challenges posed by holiday returns, retailers are adapting to the changing landscape. The adoption of returnless policies is just one facet of a broader shift in how retailers approach returns. Companies like Amazon, Wayfair, and others are embracing innovative strategies to manage returns effectively. For instance, Amazon allows customers to keep items on “a small number of returns as a convenience and to help keep prices low.” Additionally, retailers are exploring options like store credits, charging for returns, and incentivizing customers to bring online purchases back to physical stores. This adaptability reflects a proactive approach by retailers to not only mitigate returns-related costs but also enhance the overall customer experience.
Challenges and Considerations:
While the adoption of returnless policies presents an innovative solution, retailers must navigate several challenges and considerations. Balancing the desire to minimize excess costs with customer satisfaction is a delicate act. Retailers need to evaluate the impact on customer loyalty and brand perception, considering how returnless policies align with evolving customer expectations. The implementation of these policies also requires a robust technological infrastructure to identify items eligible for such treatment accurately. Striking the right balance between cost-effectiveness and customer-centric practices is an ongoing challenge that retailers grapple with as they reshape their returns strategies.
As retailers embrace returnless policies, the need for robust fraud mitigation measures becomes crucial. Technology plays a pivotal role in extending this service to trusted customers while safeguarding against potential abuse. Amazon, for example, employs technology to identify bad actors attempting to exploit returnless policies, taking action and collaborating with law enforcement to address fraudulent activities. While these measures are essential to protect retailers from losses, they also underscore the complexities of implementing innovative returns strategies in a landscape susceptible to fraudulent behavior.
In the ever-evolving world of retail, the adoption of “keep it” or “returnless” policies marks a significant shift in how U.S. retailers tackle the challenges posed by holiday returns. Fueled by the desire to optimize profits and streamline operations, this strategy reflects a dynamic response to the financial strain imposed by returns. As retailers balance the intricacies of customer satisfaction, evolving expectations, and the imperative to cut excess costs, the adoption of innovative returns strategies becomes a strategic imperative. In this blog, we’ve explored the growing trend, returns statistics, the financial impact, retailers’ responses, challenges and considerations, and the critical aspect of fraud mitigation. The retail landscape is witnessing a transformative moment as industry players proactively reshape their returns strategies to navigate the complexities of the post-holiday season.