CUSTOMER RETURNS
GRAPH 1
An unfortunate consequence of this reality is the increase in customer friction felt by those staffing the contact center . Customer frustration will reign supreme , understandably , when refunds or replacement items are delayed or fail to meet their expectations .
And customer dissatisfaction will only grow when they are placed on long holds or there are long email / chat response times . This increases the likelihood that their frustrations will be taken out on customer service agents .
SOURCE : BOXZOOKA , USING NATIONAL RETAIL FEDERATION DATA
NUMBERS REVEAL URGENCY
Prior to COVID-19 , retail returns in 2019 totaled around $ 309 billion , which was about 8.1 % of total retail sales for the year .
Returns hit their peak in 2021 and 2022 , registering at $ 716 billion or 16.6 % of sales in 2021 and $ 816 billion or 16.5 % of sales in 2022 , according to the National Retail Federation ( NRF ). Last year , for the first time in several years , we saw a decline in total returns at $ 743 billion or 14.5 % of total retail sales ( SEE GRAPH 1 ).
Despite that recent decline , returns are still astronomically high compared to the pre-pandemic figures .
In 2019 , retail growth for the year stood around 3.5 %, more than doubling to 7.6 % in 2020 , then to 14.4 % in 2021 , COVID ’ s peak ( SEE GRAPH 2 ).
From there , growth has been declining steadily , down to 7 % in 2022 and 3.6 % in 2023 . While overall retail growth has returned to pre-pandemic levels , returns have not .
What retailers are learning is that pandemic habits , more online shopping and less in-person shopping , aren ’ t fading nearly as quickly and are likely to become permanent .
That ’ s why , even though the rate of returns may be leveling out , it remains historically high as eCommerce continues to accelerate with more and more people choosing to shop online . This means the returns problem isn ’ t going anywhere and will continue to present challenges to customer loyalty .
It ’ s a tricky reality for business , one that indicates losses from returns will only get worse . More than ever before , brands and retailers need strategies in place that not only aim to reduce the cost burden of returns , but that also keep customers happy and loyal !
DICHOTOMY OF RETURNS AND CUSTOMER LOYALTY
During the height of the COVID-19 pandemic , it was exceedingly easy to return an item , or at least get compensated for an item that failed to meet expectations . Customers came to expect this ease of returns , but it didn ’ t last long .
As the pandemic eased , retailers again faced an age-old problem that had simply taken a backseat for the previous few years .
The losses associated with returned merchandise weren ’ t going away . In fact , in 2022 for every $ 1 billion in sales the average retailer lost $ 165 million in returns , reports the NRF . This was a sobering reality check that has pushed retail businesses to look for ways to recover some of this cost .
When an item fails to meet a customer ’ s expectations , one of several things can happen . The item can be returned , at which point the retailer evaluates whether it should be moved back to store shelves , recycled , or trashed .
This incurs some cost which can oftentimes exceed the returned item ’ s value . This is magnified for eCommerce marketplaces , where the lack of physical contact with the product prior to purchase increases the returns rate exponentially .
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GRAPH 2
SOURCE : BOXZOOKA , USING NATIONAL RETAIL FEDERATION DATA