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Three practical tips to reduce the impact of returns’ costs on retailers’ bottom line

By Angela Gonzalez-Rodriguez

Dec 30, 2021

Business

Image: Returns at Target

Returns processor Optoro estimates that the cost of returns for retailers will be 59 percent higher than a year ago. Veteran retail executive shares some tips to keep these rising costs contained.

This hike translates into a 17 dollars price increase for retailers per item to be processed for return (returned goods will cost retailers 33 dollars of the price of a 50 dollars item to process according to data analysed by Optoro.)

120 billion dollars in returned goods from Thanksgiving to January 2022

Likewise, Optoro predicts that 120 billion dollars in goods will be returned between Thanksgiving and the end of January 2022. Costs are quickly rising, driven by supply chain’s disruptions, more expensive logistics and the adverse economic climate.

Nikki Baird, former retail analyst at Forrester and PwC and curren VP of retail innovation at Aptos, shares some practical tips with retailers to face these hefty costs in the best possible way.

“Retailers need to invest in fit technology and pay close attention to things they do that drive returns. Reducing returns can pay off even more than trying to adjust pricing to capture higher shipping costs. If you can get customers to keep what they buy, then there’s no shipping costs to bear for returns,” advises Baird.

The retail innovation expert also recommends retailers to look into ways to offset the costs of returns by removing operational costs in other areas, like by adjusting promotions. “Retailers don’t have a lot of options. What we’re seeing right now is that many retailers are not passing along those higher costs, hoping that the rise in costs is temporary.” One option is to raise the floor required to get free shipping. So, instead of ‘spend 50 dollars to get free shipping’ it’s spend 100 dollars or something like that. I’ve also seen retailers offer bundles, like for clearance – get a grab bag of 10 items in your size for 100 dollars, to make it more cost effective to deliver. That might translate to ‘Buy these 3 pieces together’ promos or to get to free shipping,” summarises Baird.

Last but not least, Aptos’ executive recommends retailers to encourage their customers to buy online and return in store: “I see more retailers putting a heavier emphasis on ‘return to store’ as the more convenient option and the means to customers getting a refund faster or option to pick the right item right away. That doesn’t prevent returns, but it does make them cost less to the retailer.”

Image: Returns, Target. Credits: Mike Mozart

Returns