E-Commerce uses Smart Tech to Combat the Crippling Costs of Returns

Returns affect every aspect of an eCommerce business from sales, to service and customer satisfaction. Returns attack profit margins, slash conversion rates, and can ultimately threaten your business.  

E-commerce Returns

Every purchase online is twice as likely to be returned as those items bought in-store and consumer interest in free shipping and returns is at an all-time high.  In the US more than $761 billion in merchandise was returned in 2021.

This information alone shows how critical it is for e-commerce to leverage their current advantage over the high street and allow automated decision making to study inventory performance and take actions in real time to mitigate the impact of returns. 

Smart Tech Taking Action For eCommerce Returns

One way that eCommerce return rates can be minimised is by ensuring that inventory is performing. And by combining inventory data with market data, online retailers have the power to factor returns into marketing and profitability calculations that channels have no idea about. 

For example Upp is working with a high end fashion retailer based in the US who, when we looked into the data, had in the last 30 days recorded 9 days of negative net sales due to returns, with a return rate of 54%.  We identified that a whopping 61.2% of total sales were negative net sales and identified the product lines responsible for this.  

The customer now has direct insights into this problem and looking into its eCommerce returns by category has already prompted them to make changes to their returns policy. And Upp is working 24/7 making intelligent decisions for their online advertising, (such as re-utilising the 12.2% of Google Ad spend previously swallowed up by promoting these items) to help reverse this unsustainable trend for them.

Take a look at what other customers are saying about Upp’s operating system for retail trading.

Having such real time insights into returns data allows retailers to be agile in their response and mitigate the impact of returns on net contribution. For example, with immediate insights retailers can observe the SKUs that are most returned, and decide to put the price up, increase shipping costs, or decrease promotion on problem products instantly.  Machines can learn to identify bundles of SKUs that work well together, or conversely are beyond the returns threshold, and take action to either promote or de-prioritise them immediately, whilst reporting this back into the business.

E-commerce returns and sustainability

Handling high volumes of rejected goods is expensive. An unwanted product must be returned, checked and then either cleaned up and repackaged or discarded. For low-value goods, this represents a loss on the transaction. Indeed, some companies, such as Amazon, now calculate whether it’s worth accepting a return or simply refunding the customer and writing off the lower loss. Many companies now have specialist teams concentrating on how to reduce returns

The sustainability impact report from reverse-logistics specialist ReBound Returns highlights some chilling statistics:   

Clearly minimising the need for returns by ensuring inventory performs is key.  However, there are solutions throughout the process to help retailers minimize waste and value erosion.

Using technology for Reverse Logistics

In 2020 the global reverse logistics market was valued at $636 billion and is projected to exceed $958 billion by 2028. Technology is already pivotal in helping businesses resell, reuse and recycle returned goods as well as minimising storage and distribution costs.

Machine learning (ML) technology can be leveraged to support the customer through the return journey whilst ensuring the most cost effective solution is found whilst at the same time identify the most efficient solution for handling returns. And AI and automation technology is being widely used to make the storage and processing of returns more cost effective and efficient.

The Future for eCommerce Returns

Without technology e-commerce would not exist, so why wouldn’t brands and online retailers take advantage of the emerging machine-led technology and advances in AI and automation, that can make a real impact to their ongoing battle with returns?

Get in touch if you’d like to talk to us about this in more detail.