A crucial aspect of any e-commerce business is the return rate, but following a bumper holiday season, for some retailers the cost of taking a product back is too high, so customers can keep the product and still get their refund.

Why it matters: Data from the returns processing firm Narvar shows that returns in 2020 were up 70% on the previous year’s numbers. While too many returns can be a ‘disease’ on a company that shreds profits, well-managed returns for a loyal, solid customer base can be an engine for growth.

Online shopping has shifted from big ticket items to more everyday essentials that cost less than the $10-20 that processing online returns tends to cost.

According to a story in the Wall Street Journal, some of the US’s largest online retailers have come to an AI-informed conclusion that returns aren’t worth their while.

  • The phenomenon appears at both ends of the price spectrum: for small items under $10, the cost of processing is more than the price of the product. For large items, high shipping fees preclude returns.
  • Different companies are doing it differently: For Target, in a small number of instances they will encourage the customer to donate the unwanted item; Walmart, meanwhile, reserves the ‘keep it’ option based on customer purchase history and whether the product is resalable. Amazon, for its part, provided no further details.

Food for thought: As one customer encouraged to keep her incorrect item put it, “How much money is Amazon making to be able to absorb these mistakes?”

Eye on the future: As returns become more common so too does returns fraud – companies need to be aware of this growing development.

Sourced from the Wall Street Journal, Shopify