The National Retail Federation (NRF) reported a 5.5% increase in holiday retail spending for 2017 totaling $692 billion. The end of the year is peak season for retailers as they embrace global gift-giving traditions practiced by consumers. But they are not the only ones reaping the rewards of flush holiday spending. Third-party logistics (3PL) companies, the likes of UPS, FedEx and DHL, also bank on the holiday shopping spree, with some shippers increasing rates during surge periods.
The real tell for the 3PL industry is the post-holiday return season. National Returns Day (January 3), coined by 3PL shipper UPS, is a day of reckoning for retailers as it registers the onslaught of shipped returns made by consumers. UPS projected that 1.4 million return packages would be sent back to retailers, when in actuality, UPS processed six million return packages the first week of January!
The cause of returns
A retailer’s return policy plays an essential role in a consumer’s overall shopping experience, even if what drives consumers to seek returns is subjective. Post-purchase dissonance, otherwise known as “buyer’s remorse,” greatly affects e-commerce return rates, especially for apparel, home goods, furniture and automobiles. Studies show that: shoppers are more likely to frequent retailers who offer free shipping and returns; 79% of consumers rank free return shipping as important when selecting an online retailer and 46% are willing to abandon a shopping cart if they discover free returns are not part of the deal.
In a recent report conducted by Invespro, 30% of all products ordered online are returned, in comparison to 8.9% of brick-and-mortar purchases. The impact of returns becomes even more apparent when you consider that overall merchandise returns account for more than $351 billion in lost sales for U.S. retailers.
What’s a retailer to do?
Consider the omnichannel retail experience holistically with a clear focus on how to implement efficiencies that benefit the consumer and your bottom line. Retailers should start with the assessment of customer support processes and existing return policies to ensure they match consumers’ needs. It may lead to making hard decisions, as in L.L. Bean’s recent decision to scrap their century-old “no questions asked” return policy in favor of a one-year limit on returns to reduce growing abuse and fraud.
Smart retailers that embrace drop shopping as part of their reverse logistics process will advance omnichannel fulfillment offerings. The average retailers spend on reverse logistics is 8.1% of total sales. That expense includes managing the intake of unwanted or counterfeit goods, refurbishing damaged products and when necessary, redistributing items to manufacturers. Partnering with 3PL shippers can help eliminate headaches and provide visibility into operational efficiencies. An alternative solution would be integrating 3PL services in-house, as Amazon will be doing later this month when it expects to launch its new shipping service, Shipping with Amazon, for Amazon Marketplace retailers.
With 90% of Fortune 500 companies already implementing 3PL and fulfillment services to control costs, the key is in finding scenarios that work best for your business. Take the launch of the Kohl’s and Amazon partnership that provides consumers with more convenience. Now purchases made on Amazon can be returned at Kohl’s for free! Whatever route you opt for, now is the time to innovate, and potentially reinvent, how to engage with consumers.
Anjee continues to be an insatiable collector of all things retail. She’s a student of culture living next door to future shoppers, whose fleeting trends constantly change the retail landscape … driving retailers, landlords and developers crazy!