Retailers’ cheapest option for returns is also shoppers’ favorite

Long an unheralded piece of the supply chain, reverse logistics — or the process of transporting returned merchandise — is now a hot topic as consumers return more products than ever.

That’s in large part because we’re in the era of online shopping. With entire store catalogs available at the click of a button, shoppers are more prone to buy things they want — and things they don’t.

Product returns are even more heightened around peak season, which last year gave retailers a holiday hangover. According to the National Retail Federation, holiday shoppers in 2021 returned $158 billion worth of merchandise, 56% more than the previous year. That means about 18% of all purchases ended up back in the retailers’ hands.

But luckily for retailers, consumers are starting to shift their returns preferences. 

New research commissioned by PayPal’s Happy Returns found that the two sides see eye to eye more often than you might think. Conducted by consultancy TRC, the survey of over 2,000 U.S. customers found that shoppers’ favorite returns method is actually the lowest cost option for retailers.

The research also revealed plenty of other insights around returns preferences, including consumer psychology, predictions for the holidays and a whole lot more.

In-person returns usurp the top spot

At the start of the pandemic, the conventional wisdom among retailers was that consumers would prefer to return items without leaving their homes. And at the time, it was true.

However, in-person, box-free returns are now the preferred method over home pickup — even when it’s free. More than half (54%) of respondents said they prefer this method, compared to just 26% preferring home pickup.

In fact, 63% of shoppers said they’d be much more likely to shop with a retailer that offers free, package-free returns with immediate refunds.

“The growing preference for in-person, box-free returns is a huge opportunity to deliver customers the seamless returns experience they’re looking for while significantly driving down costs by up to 40%,” said David Sobie, vice president of Happy Returns.

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The math here is relatively intuitive. By offering in-person returns, retailers can cut transportation costs like drivers and fuel. 

But going a step further, in-person returns can drive new purchases. Once in-store, 62% of respondents said they’ve used their refund to shop at that location.

Notably, more than half of shoppers who favor in-person returns prefer to do so at a third-party location like a returns bar.

Convenience is king

Unsurprisingly, returns are seen as a major inconvenience for shoppers. More than 40% of them said they’d rather sit in rush hour traffic than return a purchase they made online.

Since returns are inevitable, consumers are seeking the most convenient method possible. But their definition of convenience isn’t exactly what retailers have had in mind.

One area they agree on is price. Eighty-seven percent of shoppers said free returns are an important factor when making a purchase online, and brands clearly understand this given how many of them offer free dropoff and pickup.

But there’s a disconnect. Retailers are underestimating how willing customers are to travel to make a return — and how inconvenient it can be to pack up products at home. 

Nearly half of shoppers don’t have access to a printer to print return labels, and 66% of high-volume returners consider mail returns annoying. Additionally, 72% of respondents said they needed to reach out to customer service for help making a return, a nuisance that can be cut out by offering them in person.

What’s more, a whopping 96% of shoppers said they’d be willing to travel to make a return. Four in 10 of them would travel up to 5 miles, and another 35% would travel up to 10.

Shoppers will return more products this holiday season

PayPal and Happy Returns anticipate a chaotic holiday season for reverse supply chains. 

Nearly half of shoppers said they plan to buy 60% of their holiday gifts online this year — those purchases have significantly higher return rates than in-store sales.

To boot, 35% of respondents said they plan to spend more this holiday season than last, including 52% of shoppers under 30. That group is more likely to engage in the practice of bracketing, or buying multiple items with the intention to return some of them.

About 43% of shoppers said they’ve bracketed in the past year, with 12% saying they always bracket. Those figures are significantly higher for shoppers under 30, rising to 61% and 20%, respectively. Close to 60% of those young shoppers plan to bracket this holiday season.

Watch: Returns – the economics of the logistics and how to deal with Buyer’s Remorse

Inflation is also driving an uptick in returns, particularly for young and high-volume shoppers. Among people ages 18 to 44, about 23% said they have been returning a greater percentage of online purchases due to the economy, which has also led to rising costs for retailers.

“Merchants are facing greater challenges with online returns heading into this holiday shopping season, including increased logistics costs due to inflation, higher return rates as more shopping moves online and customer expectations for online returns that are easy and free,” explained Sobie.

Last year, merchants were dealing with returns well into February. It could be a similar story this year if PayPal’s research holds water.

Poor returns experiences have consequences

It’s self-evident that a poor returns experience would lead to negative customer feedback, but many retailers would be surprised at just how picky shoppers are.

Even before the sale, almost half of shoppers said they’ve abandoned their cart because the merchant didn’t offer a convenient return method. Around 86% of them will make a point to check a retailer’s policy before purchasing.

The impact is even greater once the actual returns process begins. About 78% of respondents said they would be less likely to shop with a retailer after a poor experience.

PayPal and Happy Returns suggested that retailers should reduce their reliance on mail returns, provide a convenient in-person method and offer at least one free option to make customers feel like they have flexibility.

“Give shoppers what they want: a fast and easy way to complete their return or exchange in-person at a third party or your brick-and-mortar store — without needing to print or package anything,” the report advised.

Offering that convenience is always important. But during the holiday season, brands should be prepared to step it up even further — given how finicky the modern consumer has become, the next few months could be make or break.

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Editor: Jack Daleo