10 ways to reduce eCommerce returns & their cost

eCommerce returns cost UK retailers an estimated £20 billion over the course of 2023 (ParcelHero, 2023), with that figure rising to an astounding £587 billion for US brands across the whole retail industry (NRF, 2023). And it’s hardly a surprise. Between Red Sea delays and the cost-of-living crisis, retailers attempting to battle returns on their own are struggling to keep costs down.

But it’s not just the rising cost of doing business and processing the returns themselves. Our research also shows that consumers are more returns-hungry than ever before with almost half of UK shoppers (47%) considering themselves to be a 'regular returner.' In fact, return rates rose across the board in 2023 and volumes were once again up by around 3% from last year. This increased strain on profit margins means returns are clearly a major area of concern but one where retailers can take steps to improve customer experience and recoup profits.

As an expert in the returns space, providing data-driven insights to key international retailers, ZigZag CEO AI Gerrie shares his personal Top 10 tips on how retailers can make reduce the often-costly number of returns.

1. Improve product descriptions and images!

A crucial but often overlooked step to optimise returns is to simply improve product descriptions and images on your website. For example, size guides may be inconsistent across brands, particularly for womenswear. In fact, 69% of women shoppers claimed to have processed a return due to poor fit.

Companies like Easysize, Sizewise, and probably the most renowned AI-powered size recommendation tool Fit Finder – which boast retailers like Uniqlo, Zara, UNTUCKit as clients – ensures customers can make a more informed decision on the initial sizing of their clothing or footwear. Amazon just this year introduced a number of AI-backed initiatives that helped customers find a better size through data-driven recommendation based from similar customers and more accurate charts.

Around a third of shoppers made returns last year as the product didn’t look like it did on the website. Now this means you may need to update product images to better reflect how items appear in real life. Many retailers now utilise a range of models and videos to better showcase how items look on the average joe. 30% of shoppers say they would return less if retailers had more video content of the products being used or worn.

A detailed and thorough product description that highlights the nuances of an item will help reduce returns and will improve the customer experience in the long run as they know what to expect when they order.

Al discusses the importance of reducing size issues in this interview on BBC Radio 4.

2. Ask your customers for reviews and reward them for it

Simply asking your customers for reviews of your product and returns policy is another easy way to make the process more streamlined. Offering incentives and rewards for the customer is the easiest way to make this happen.

Companies, like our Global Blue compatriot Shipup, can add a sophisticated level of personalisation in tracking emails – from video messages to new or loyal customers to smart delivery estimates. But they also offer a chance for retailers to get valuable satisfaction surveys completed right after delivery. 83% of consumers used a tracking service to monitor their return in 2023; therefore, why not promote customer feedback forms to get more data on why they are returning?

Good reviews will not only boost sales by impressing new customers, but the more informative reviews – that potentially highlight true fit or finer details – will assist your customers in making the right purchase the first time round, ultimately reducing returns.

32% of shoppers aged 18–25-years-old would return less if they had more product reviews to compare against

3. Use a digital returns portal to collect and use data insights

From the introduction of loyalty cards used to farm customer data, to the supply chain management systems controlling inventory levels, data plays a vital role in supporting business decisions for modern-day retailers.

However, so many retailers are still sitting on an untapped data resource – returns. The "Label in the Box" method of returning is now outdated and restrictive. Utilising data is key to retailers seeking to minimise the impact of returns.

Retailers using returns portals to collect data insights from the user journey can predict trends and make more informed decisions. Using a portal with ZigZag’s Returns Reporting Hub capability can be used to identify problematic products which may have sizing issues or defects – information that can be used to adjust measuring guides.

The return reasons report may also show a list of products coming back due to “arriving damaged”, which the retailer can flag to suppliers or possibility carrier services. The more you know about why your customers are returning, the more you can do to prevent returns in the future. In short, knowledge is power.

4. Identify and combat serial returners

Data insights can also be used to identify customers who frequently return items - so-called 'serial returners'. Retailers can choose to reduce marketing outreach to repeat offenders which will in the long run limit the cost of returns from this high-impact group.

Of course, not all serial returners are bad - they can in fact be your most regular and loyal customers, so good data is key to understanding customer behaviour. In general, we recommend trying out other methods of returns reduction before getting too strict with serial returners. However, it is definitely worth blocklisting shoppers that wardrobe, i.e. frequently return obviously used clothing or damaged clothing. It probably isn’t worth hunting down the Instagram accounts of your shoppers though…

71% of consumers are likely to pay for a membership or subscription if it offered free returns. So, whilst this certainly won’t reduce returns, in fact it may well do the opposite, it will allow you to recoup some of cost. Subscriptions and VIP incentives offering free returns have been utilised by a number of high-profile brands in recent years and it might be worth exploring if you don’t want to penalise serial returners.

5. Improve your picking process

Collecting data from the user journey will also help make warehouse processes more cost-effective and efficient. Order picking is the first stage in fulfilling a customer's order and it's essential that the process is flawless to ensure that packing, shipping, and post-sales activity can run smoothly.

Channelling data to the warehouse can improve this process by reducing human error and helping to ensure the right products are delivered every time. Keep an eye on your return reasons to understand how often incorrect items are received and why.

10% of returns are attributed to the order not arriving in time. A faster warehouse will minimise returns made because the item didn’t arrive with the customer in time for their big occasion, be it a birthday present or a prom dress. Speed is of the essence for many retailers, but fast fashion retailers in particular.

Cut warehouse processing times by 50% with an online portal

6. Prioritise packaging to minimise damage

Leaving aside the physical impact on the item, receiving a warped, distorted, or damaged parcel through the letterbox is a tell-tale sign that a retailer's warehouse packaging process is not up to scratch.

This often occurs when there's too much empty space left inside a boxed item or if a fragile item hasn't been adequately protected. Streamlining the packaging process within the warehouse will prevent this from happening and, in doing so, reduce the amount of returned items.

82% of people will use the original packaging to make their return. So more durable packaging will help ensure the goods are also not damaged on the returns journey.

7. Offer Refund to Store Credit or Live Exchanges

Prioritising a flexible returns policy will keep retailers competitive in the current market. Offering multiple options at the point of returns, like a refund to account or a refund to gift card, gives the customer a choice and will save the sale for retailers.

57% of consumers would happily take a refund to store credit. And even more impressively, this rises to 71% for 18-25-year-olds. So, there is a real appetitive for the simplicity and fast-refunding return option. Retailers can also expect customers that opted for a refund to store credit to spend 147% of the gift card balance within two months.

Exchanges can also be a great way to help retain revenue and give your customers a chance to order a replacement item in a different size or colour. Whilst it doesn’t reduce returns immediately, it does reduce the need for customers to bracket their purchases (buy multiple sizes and colours) as they are safe in the knowledge you offer an easy exchanges option.

74% of consumers would like retailers to offer easy online exchanges and retailers can enjoy saving 24% of their sales that would have been lost to exchanges.

8. Review your returns policy and consider charging for returns in some markets

In the UK and US, customers have had a long-standing assumption that returning items should be free of charge. That resolve to not pay for returns is weakening. With some of the most influential retailers, such as boohoo, Zara, H&M, and THG, charging for returns in recent years. CBS even reported in late 2023 that around 40% of US retailers were now charging for returns, corroborating with ZigZag’s peak season data showing 63% of UK retailers offered some form of paid returns.

We know there is no such thing as a 'free return' and consumers are beginning to understand that too. A diverse policy that adapts to different markets can be extremely cost-effective. Reviewing your policy and considering charging customers in certain markets is a way to do this.

In addition, charging for returns discourages the likes of the serial returner and allows you to offer free returns as an incentive to loyal customers, or perhaps at peak season or sale times. Our iconic client New Look reduced returns by 0.5% without impacting sales by charging for returns last year.

We will discuss the free versus paid debate in more detail in the upcoming weeks.

9. Offer repair, rental, or reCommerce to get products back in the supply chain

An emphasis on the circular economy and getting products back into the supply chain must be at the core of a retailer's returns policy. Selfridges is leading the way in this area having recently announced their aim to have resale, repair, rental, and refill options make up half of all transactions by 2030.

Offering the customer options that champion the circular economy has the double whammy effect of getting items back into the supply chain and limiting the returns that go to landfill. So whilst many of these options won’t reduce returns, they will reduce the cost to your business and the impact they have on the environment.

56% of UK 18-25-year- olds have bought or will buy second-hand clothing; this rises to 71% for the French younger generation. So, retailers that go green can turn returns into new sales opportunities, and a way to impress younger generations and win new customers.

10. Make returns the best experience possible for your customers

Providing flexibility and visibility to the customer will show them that as a retailer you value their custom and you want to make their returns process as easy as possible. A flexible approach can be applied to how and where shoppers return the product to how the refund is delivered.

By offering a range of options, you will appeal to a wider audience. 84% of consumers check the retailer’s returns policy before making a purchase. So a flexible and considerate returns policy can actually win customers.

At the end of the day, a happy customer, whether they've returned or not, is a repeat customer. The returns process should not be overlooked as a crucial element of customer satisfaction, so listen to the customer and take the time to make your returns process as seamless as your purchase process. You can see how the ZigZag portal works here >>

79% of shoppers would boycott a retailer if they suffered a poor returns experience, so every interaction with your customers counts, even after purchase.

82% of shoppers agree that an easy returns policy would encourage them to shop with that retailer again.

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