How to protect your bottom line against a rising eCommerce return rate

Gibson Toombs

January 6, 2023

8 min read

Now that the holiday season is over, it’s time to talk about returns.

For online retailers, satisfying customers sometimes gets in the way of maximizing revenue—and the challenge of eCommerce returns is a perfect example of this.

Simply put, today’s consumers expect a fast, simple, and cost-free returns process for online purchases. Many brands will pledge this in their returns policy to secure higher sales and customer loyalty. But for growing companies that can’t afford to take significant revenue losses like Amazon, Walmart, and other online retail giants, handling eCommerce returns is a more complex issue.

While a generous returns policy will help keep your customers—not to mention your customer support team—happy, it can also have a devastating effect on your profit margins. In fact, the act of managing returns can cost a company up to 66% of the product’s original price, even when the product is returned in perfect condition.

To make matters worse, the average eCommerce returns rate is rising year over year. In 2020, it was 10.6%, and now it’s hovering around 16.5%. As an eCommerce merchant looking to both optimize revenue and deliver a positive customer experience, constantly analyzing and improving upon your returns policy should remain a top priority.

Let’s dive deeper into the rising eCommerce returns rate, as well as the steps your business can take to keep returns from eating away at your bottom line.

What are the most common reasons for eCommerce returns?

Online stores experience two to three times more returns than traditional brick-and-mortar stores. Here’s a quick breakdown of the average returns rate for the most common products sold online:

  • Apparel: 10.01%
  • Beauty: 4.99%
  • Electronics: 8.28%
  • Health & wellness: 4.20%
  • Jewelry: 8.31%
  • Sports & outdoors: 6.10%

When a customer shops at a physical store, they can see, feel, touch, and smell the product before purchasing. Online shopping, on the other hand, comes with certain limitations and challenges that explain the higher returns rate.

It’s important to understand the main reasons why online shoppers initiate returns. As an eCommerce merchant selling any of the items listed above, you’ve probably run into the following situations—and if you haven’t, you will eventually:

The customer is ‘bracketing’

Particularly common in the apparel industry, bracketing is the act of purchasing an item online with the intention of returning it. For example, rather than going to the mall to try on and buy clothes, a customer will purchase multiple clothing items from an online store, try on each one, and return the ones that don’t fit.

From the customer’s perspective, this may seem like a harmless act, but it can cost the merchant significant time, money, and resources in the long run. Bracketing became even more common during the COVID-19 lockdowns, and it continues to be a headache for online retailers, causing many to rethink their returns policy.

The product doesn’t meet expectations

When someone buys something from an online store, there’s always the possibility that they’ll be unsatisfied when the product shows up at their door, or that they’ll simply change their mind.

Imagine a pair of shoes that don’t fit, a tool that doesn’t work, a piece of jewelry that doesn’t match the image online, a gift that the recipient doesn’t actually want, and so on. In many cases, there’s no way of avoiding this. But in others, the merchant just needs to improve their product details page (PDP) to give customers a clearer picture of what they’re buying.

The customer is actually a fraudster

In 2020, online retailers lost $7.7 billion to eCommerce returns fraud—and the issue continues to persist in a post COVID-19 world.

Generally, this is how it works: The fraudster purchases an item online with a stolen credit card or counterfeit money, then immediately returns the item to profit from the cash refund. When writing your returns policy and adopting fraud prevention solutions, the growing threat of eCommerce returns fraud should remain top of mind.

How to reduce your eCommerce returns rate

Now that we’ve gone over the most common reasons for eCommerce returns, let’s explore some actions your business can take to prevent these issues and simultaneously improve the customer experience:

  • Provide clearer product information: Update your product pages to achieve full transparency so that customers know exactly what they’re buying. This means publishing detailed product descriptions, high-resolution images, and customer reviews. Also, if you're selling clothes, provide a sizing guide to prevent customers from choosing the wrong size.
  • Offer product exchanges and store credit during the returns process: Rather than a cash refund, give customers the option of exchanging returns for other products or store credit, so you don’t end up losing the revenue from that sale.
  • Collect data to track returns: Implement an analytics solution that allows your team to collect, organize, and analyze returns. With real data as your guiding light, you can write a smarter returns policy, make necessary updates to product pages, and so on.  
  • Take steps to prevent fraud: AI and machine learning tools can help you identify fraudulent activity in real time, suspend customer accounts, and stop returns fraud before it occurs. You should also train your staff on how to recognize suspicious behavior and how to respond.
  • Make your returns policy transparent: Keep your returns policy front and center throughout the customer journey. The policy should be straightforward, easy to find on your website, and highlighted during the checkout process.  

A quick note about automating eCommerce returns

Unfortunately for online retailers, there’s no way to bring your eCommerce returns rate down to 0% without turning customers away. However, in addition to reducing returns by taking the steps above, you can streamline the returns process via intelligent digital solutions—and ultimately lower the cost and complexity of managing eCommerce returns.

As with sales and marketing, order fulfillment, customer support, and other business processes, automation is the key to higher productivity, lower costs, and greater scalability—and the returns process is no exception. There are solutions you can implement that will eliminate the redundant, time-consuming tasks associated with returns, such as providing return labels, processing refunds, executing product exchanges, and sending status updates to customers.

With the right eCommerce partner, you can integrate, customize, and deploy automation tools that simplify the returns process for both your customers and employees.

Team up with Codal to optimize eCommerce for your business

If you're reading this, chances are you’re looking for solutions to an expensive and time-consuming eCommerce returns process. There are many ways to make this process easier for both your customers and employees, from updating product pages with better content, to providing alternative options like store credit, to collecting and analyzing customer data.

Above all, you need an eCommerce infrastructure with intelligent, scalable tools and workflows that drive internal efficiencies and enhance the customer experience. That’s where Codal comes in.

We’re an award-winning eCommerce and UX design agency that helps brands solve problems with elegant digital solutions. Our team has planned and executed eCommerce transformations for many enterprise organizations, including Thermos, Cosori, GOREWEAR, and Garrett Popcorn—and you can learn more about those projects here.

We’ll optimize your online store—as well as the back-end tools and workflows that support it—to deliver a smooth and engaging customer experience, from homepage to checkout. With a staff of the world’s best designers, engineers, and digital strategists, along with a partnership network that includes industry leaders such as Shopify and BigCommerce, Codal has the technical knowledge, experience, and resources to equip your brand for success in the ever-evolving eCommerce landscape.

Interested in learning more about how Codal helps businesses dominate the online selling space? Get in touch with a member of our team today!

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