Returns, the bane of online retail?

Amazon warehouse photo from WSJ.com
Really interesting article in today’s Wall Street Journal entitled Rampant Returns Plague E-Retailers, in which the author states that “as much as a third of all Internet sales gets returned”.

That’s huge and a massive hit for the profitability of these stores, but as the article highlights, with free shipping and free return shipping, there are a lot of people who order clothes in multiple sizes with the intention of returning all but the ones that fit best or even ordering clothes to wear once and then return.

The latter I call the “prom dress syndrome” and while my daughter hasn’t done it, I am aware of other families that use that sort of approach for an expensive purchase. It’s “use once and return” and in my eyes, it’s fraud because the business then has to either lie to the next customer and say it’s new, or sell it as used and write off the cost of the product markdown.

I was just at Bed, Bath and Beyond to buy new bed sheets and the set I bought was $159.99 marked down to $59.99 on clearance. Who knows, perhaps someone bought them, put them on their bed, and decided they didn’t like the color. Or the feel of the fabric. Hmm… might be time to go wash them before I put them on my own bed, yes?

For online retail, though, shipping is a significant additional cost and when you add the casual fraud of too many customers who buy a bracketing set of sizes rather than candidly assess their own current physical state, or do the same with their families, it’s a really big problem.

Fortunately there are some smart retailers who are mining their data to identify these habitual returners and slow things down. The WSJ highlights Rue La La, Modnique, and The Gap, all clothing shops (because clothes that don’t fit is the #1 reason for returns across the board), but it’s a problem for every online retailer, and a tricky balance to figure out how to encourage impulse purchases, knowing that most customers will keep something once they try it or try it on, and discouraging lazy or fraudulent customers who have no intention of keeping anything, they just want to play for a day, a week, a party or a special occasion.

It would be an interesting experiment to assign a “quota” of returns to each new customer and offer a reward for them being savvy online shoppers and not returning what they purchase over time. Better discounts? Lower shipping costs? Both make sense. And those customers who do become problematic with returns might find that they’re paying 10%, 20% or more in shipping surcharges against their transactional history. It’d serve as a “returnaholic tax” and would ensure that the good citizens aren’t left funding the extra return costs of the minority.

The article outlines some other smart solutions, but what do you think? If you’re running an online store, how do you try to minimize returns and identify those people who are most likely to be chronic returners?

3 comments on “Returns, the bane of online retail?

  1. Hmm. I completely agree it’s uncouth and unethical to buy something with the intent of using it once then returning it. No argument there.

    I’m less clear on the problem of ordering clothes in different sizes to see which fits right, and returning the rest. I rarely buy clothes online -because- I can’t try on the different sizes to see which fits. There’s no rhyme or reason on clothes sizing in stores. I have to try on the actual item I’m buying, since I’d say around 75% of the time what I think will fit on the store rack simply doesn’t fit right. It’s not about my inability to “candidly assess their own current physical state”; in a store, I grab what I think will be the right size, hold it up, take it to the fitting room — and viola! find that it really doesn’t fit well at all. Same with other items, e.g., shoes. I’m a size 11, but it just isn’t the case that any old shoe marked “11” will fit right. Or, maybe it’s physically the correct size, but has some other deal-breaker, like a mis-matched arch shape, that makes it so uncomfortable I couldn’t wear it. So, if I -were- to order online, the guilt-free, stress-free, and cost-free ability to order a range of sizes would be a must. If a merchant has a problem with that, then from my perspective, the problem is with the merchant, not with me as a (potential and now non-) customer. Thus, I rarely order size-important items online. If a merchant wants me as a customer, those are my terms, and I don’t feel they’re in the least unreasonable. I suspect some merchants are indeed fine with that. But any online merchant who complains about size-testing like that when it actually matters, foo on them. :} That’s simply an advantage of a brick&mortar store and if an online outfit wants to compete with that, they have to realize customers need to try things on before “buying.”

    (I do try to practice what I preach. I am myself an online merchant, though selling ebooks. We have a no-questions-asked return policy. Our return rate is miniscule. Understandably, ebooks aren’t size critical, but my philosophy is that the vast majority of customers are on the level, so a return request is highly likely to be legit, whether of ebooks or clothes.)

    I do wonder what percent of sales really ends up being lost to truly unethical customers (e.g. buy with intent to wear once and return).

  2. This is an old posting, but I am having a look at the topic.

    We get the behavior we encourage. The complaint here about “wardrobers” and other returns policy abuse is ridiculous. If you allow buyers to return goods you cannot control what they do with them in the intervening period. I find it hypocritical when a retailer has a return policy that is publically disclosed and then complain about the returns. Change the policy! You won’t have to worry about clothes being returned if you don’t take returns. Instead, there are secret policies, tracking companies, etc. etc. Retailers are incurring costs to shore up what are unsustainable return policies.

    I ordered an item online. I found it $10 cheaper elsewhere ($30). I asked the retailer to price match and they said no. They have free returns. How dumb is that?

    If your view is that having a liberal return policy is the result of competitive pressures then roll it into your price and live with it. Retailers want it both ways. I’ll have a liberal return policy but don’t bring it back. Think about that!

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