Explore merchants’ key challenges and opportunities in managing returns within the ever-changing eCommerce landscape
The eCommerce industry is booming as consumers increasingly opt for digital-first shopping experiences, fueled by the expansion of retail and social commerce platforms like Amazon, Instagram Shopping, and TikTok Shop.
While a thriving online marketplace is encouraging, it also presents a logistical challenge for merchants: managing returns. As eCommerce volumes soar, so do return rates – putting heightened pressure on merchants to balance customer satisfaction with bottom-line impacts.
Commissioned by UPS Capital, the Return of the Goods: 2024 Rewind report draws on insights from 350 eCommerce merchants and 1,000 consumers to explore the current returns management landscape in the face of the industry’s rapid growth. By understanding and addressing key challenges in returns logistics, merchants can turn returns from a burden into an opportunity.
Understanding the Returns Landscape
Over a third (39%) of merchants surveyed face a current annual returns rate above 15%, highlighting the sheer volume of goods already flowing back through the system. This problem is most severe in the luxury, apparel, and technology industries, where merchants report the highest rates of returns.
Additionally, the financial commitment to returns logistics can be substantial, with 38% of merchants surveyed currently budgeting over $100,000 annually for this process. As expected, luxury, apparel, and technology merchants report the highest returns expenditures.
With these existing complexities in mind, the merchants surveyed identified their biggest challenges in anticipation of the volume of returns increasing. This includes the cost of returns shipping (47%), evaluating returns quality (42%), processing returns (39%), effectively reselling returns (37%), and meeting customer satisfaction (31%).
Spotlighting Sustainability
A resounding 91% of surveyed merchants acknowledged that eCommerce returns can have long-term repercussions on the environment. Notably, package waste and the inability to resell returned items were cited as having the most significant impact.
The data paints a stark picture – nearly a third (32%) of merchants surveyed reported that more than 25% of their returned goods cannot be resold. These unsold items represent a substantial source of waste, further amplifying the environmental footprint of returns. In fact, 9.5 million pounds of returns end up in American landfills each year.
Moreover, while 88% of surveyed consumers acknowledge that online returns have an impact on the environment, there is a lack of awareness of how few returned items are eligible for resell.
A majority (83%) of surveyed consumers believe more than 25% of returned goods can be resold by the retailer. In contrast, a third of merchants surveyed report that more than 25% of returned goods cannot be resold.
Breaking Down Bracketing
Compounding the sustainability issue within returns is ‘bracketing.’ This practice occurs when consumers purchase multiple sizes or colors of the same item online with the intention of returning the rejected versions.
Over 2-in-5 (42%) consumers surveyed say they have bracketed their orders, with this practice most popular amongst Millennial (60%) and Gen Z (57%) respondents.
Merchants, on the other hand, are convinced that bracketing is a much more common tactic, with 87% of those surveyed believing their customers do so. This belief was highest amongst luxury and apparel merchants.
Turning Returns into Opportunities
The rise in returns presents a unique opportunity for sellers. By transforming this post-purchase interaction into a positive experience, merchants can gain a competitive edge. Through leveraging data-driven insights, innovative technology solutions, and strategic partnerships within the returns logistics process, retailers can enhance customer satisfaction, foster loyalty, and deepen relationships.
UPS Capital is at the forefront of this movement and dedicated to giving merchants the tools and expertise needed to navigate the evolving returns landscape. Together, we can unlock the full potential of returns and thrive in a dynamic marketplace.
For more data on returns trends, get the full report
