Until the self-returning package is invented, stakeholders across the ecommerce spectrum may be feeling the pain of customer returns. A study by the National Retail Federation (NRF) has found that the average return rate for online retailers in 2021 was 20.8%, up from 18.1% in the prior year. Returns have become a massive concern in the ecommerce industry, eroding profit margins and grinding down resources.
The sheer amount of returns adds to the strain on an already overburdened supply chain, driving up shipping, warehousing, and labor costs. It’s a complex issue with multiple interconnected problems and no clear solution – and it’s affecting all stakeholders, including sellers, retailers, marketplaces, the supply chain, customers, and even the environment.
The post-holiday period is the busiest time of the year for returns and is especially tough on sellers, making this a timely discussion. Let’s take a deeper look into how ecommerce got into this returns mess, the problems that returns are causing, and some ways the industry can begin to work its way out of it.
Why ecommerce returns are a big problem for everyone
Let’s start with the key question: why are there so many returns right now? There are six main reasons for this, outside of it currently being one month after the holidays.
- We’ll start with the good news: more sales equals more returns. A massive two years for ecommerce (thanks to the ongoing pandemic) means more goods than ever are returned because more goods than ever have been sold online.
- The pandemic has reduced people’s exposure to physical touchpoints for products. They are often ordering based only on a description and photo. Customers are often returning items because they are the wrong size or the product is not what they thought they were ordering. Quality is also an issue, as a recent survey found 1 in 3 Amazon shoppers receive an item that’s lower quality than they expected at least once monthly.
- Timeliness is a big concern for customers. That same survey found that the same number of customers (1 in 3/month) also receive packages later than expected, resulting in a return. With the supply chain stretched to the max, carriers report excessive package volume and labor shortages, making it difficult to deliver packages on time.
- It’s simply too easy to return products right now. Using Amazon as an example, a variety of relatively new refund and return policies such as Refund at First Scan have made it all too easy to return an item for any reason. Programs like the Amazon Holiday Gift List have 90-day return policies, meaning you might still be dealing with Christmas returns at Easter.
- Return fraud is now easier than ever. Last year, online sales accounted for $1.050 trillion of total retail sales in the United States. Online purchases totaled $218 billion, with $23.2 billion (10.6 percent) judged fraudulent.
More Returns, More Problems
What does all this mean for stakeholders in the ecommerce pipeline?
- Sellers, retailers, and merchants have to work harder to manage returns, deal with chargebacks and accounting reconciliations, and control inventory while maintaining compliance with marketplace policies. The additional work means more labor is required. But because of the pandemic, there’s not enough labor to go around right now, resulting in slower processes, lower profits, and unsatisfied customers.
- The supply chain is overwhelmed with packages on top of labor shortages due to the pandemic, resulting in delays, lost packages, and even undelivered packages stolen from railcars. Fulfillment centers and warehouses require more labor to ship, sort, and store all the returned or replacement items. Due to ongoing product shortages in various sectors, there may not even be products to fulfill original orders or available as replacements.
- Customer satisfaction is decreased due to ongoing delays receiving their products, receiving products of lower quality than expected, or not receiving them at all. Lower customer satisfaction means more returns, more complaints, and more negative reviews of sellers.
- Increased fraud and crime have become commonplace. Along with train robberies, it’s all-too-easy for an unscrupulous or angry customer to claim they never received an item when in reality, they did. In July 2021, we reported that according to fraud-prevention firm Forter, “item not received” misuse had increased by 33% at some online merchants in the last year. The NRF found that for every $100 in returned merchandise accepted by retailers, they lose $10.30 to fraud.
- All these returns are also causing harm to the environment. More returned products sent to landfills and more fossil fuels burned in the fulfillment process is a poor outcome to an ecommerce problem.
How do we solve the returns problem?
Although it all seems a bit doom-and-gloom, there are a few things that can help get things moving the right direction again:
Cheaper to keep it – Some online retailers simply take the loss and offer a refund without the customer returning the product. Others are spending extra on packaging and quality to make the products so good that customers won’t want to return them.
Upgrade the tech – Logistics companies are using more automated systems that put the return process more in customers’ hands (for label printing, etc.), which saves them money on labor and time, allowing them to focus on fulfillment. Virtual reality tech is being employed to help better fit clothing customers, reducing the amount of returned “wrong size” items.
Patience with the supply chain – It’s estimated that the supply chain should sort itself out by mid-2022, so patience and employing upgraded tech to speed processes and cut costs are the only options until then.
In the long run, as the world gets back to normal and lessons learned during this unprecedented ecommerce boom are employed globally, the return problems should decrease. For sellers right now, increasing customer satisfaction and automating more processes might be the two best ways you can reduce the amount and cost of returns in your business.
Read more at Digital Commerce 360.
Incentivised Amazon review schemes on Twitter uncovered
An investigation by UK consumer champion Which? has uncovered the latest scheme in Amazon review manipulation. Using Twitter, thousands of Amazon merchants are enticing customers to leave five-star reviews on more than 130 products by offering refunds.
Going undercover, the Which? team found dozens of unscrupulous seller profiles by searching for phrases like ‘Amazon freebies,’ ‘Amazon free product seller for excellent reviews,’ and ‘free Amazon products for review,’ while using a phony Twitter profile to pose as an incentivized Amazon product reviewer. Perhaps unsurprisingly, most of these profiles were based in China, with others based in Pakistan, India, or the United States. These profiles offered “reimbursement” in exchange for a 5-star review of any of a myriad of products.
Just seven months ago, Amazon took decisive action on 300 China-based sellers for review manipulation, leading to over 200,00 individuals being implicated and many well-known brands, including Aukey and Mpow being among the accounts suspended. But as many suspended brands have reappeared on the marketplace under new names, now it seems the manipulated review sourcing has just begun a new game. This is not the first time social media has been implicated in review manipulation, as Facebook groups facilitating bogus Amazon reviews continue to thrive.
Which? notified Twitter and Amazon of the findings of its investigation. Twitter responded by suspending all the profiles uncovered as part of the investigation. Amazon replied to Which? with the usual boilerplate copy about how fake reviews are bad and we take our responsibility seriously, yatta yatta yatta – and has yet to acknowledge any overt action against the offending parties. If how Amazon handled the incident last summer is any indication, it’s likely an investigation is ongoing, and we won’t find out anything until after the suspensions happen.
The entire situation is a reminder for sellers that getting positive reviews with black-hat tactics is not only against Amazon policies but a dangerous game to play. Unfortunately, the depth of the problem is such that it leaves honest sellers competing against those who are not playing by the rules. Hopefully, the findings by Which? will lead to greater scrutiny of social media platforms as places that traffic in review fraud.
Read more at Which?
Amazon loses key price fixing lawsuit – what does it mean?
After an inquiry by Washington Attorney General Bob Ferguson, Amazon is shutting down its “Sold by Amazon” initiative, which was deemed anticompetitive and in violation of antitrust rules. According to the consent decree filed in King County Superior Court on Wednesday, the company engaged in unlawful price fixing and unduly hindered competition in order to maximize its profits. As a consequence of the probe, Amazon will discontinue the program countrywide and pay the attorney general’s office $2.25 million, as well as submit annual reports on its antitrust compliance.
For those unfamiliar with “Sold by Amazon,” the program worked like this: Amazon would reach out to a third-party seller, and the two would agree on a minimum price for an item. If Amazon then sold the product for a higher price, they would split the earnings. In some ways, it’s similar to buying items at a wholesale discount and reselling them. That wasn’t the case, though, due to Amazon’s dynamic pricing and how they present the items in the marketplace.
According to the AG’s office, Amazon ended up raising the prices of the items to match those of other merchants, and vendors were unable to give discounts. As a result, purchasers were frequently compelled to buy Amazon’s own brands, which the company could price as it pleased. Not only was this a terrible deal for sellers, but AG Ferguson said the program violated Washington state antitrust laws.
Rather than fight the judgment, Amazon elected to pay the fine and shut the program down. It was a shocking turn of events, since the program had been expanding since it started in 2018. The AG’s press release also contained detailed information on previous Amazon antitrust cases and investigations into other Amazon products.
