The pandemic has significantly accelerated the adoption of e-commerce, with the total proportion of UK online sales remaining considerably higher than pre-lockdown levels. In fact, research has found that digital sales in 2020 accounted for a third of total retail sales in the UK for the first time ever. By comparison, digital sales only represented a fifth of retail sales in 2019.
While e-commerce has helped retailers stay afloat, as governments everywhere restrict the use of brick and mortar shops during Covid-19, the growth in online shopping has also generated a massive rise in returns. According to research by the Association for Contract Manufacturing, Packing, Fulfilment & Logistics, over half of UK shoppers regularly returned items they bought online during the pandemic.
For retailers, returns, while necessary for good customer service, come with financial difficulties. Namely, returns eat into a company’s profits as retailers are forced to refund a consumer’s purchase and to pay post and packaging for a second-hand item. These items are usually difficult to resell as the majority of consumers expect to pay for brand new products when purchasing goods online.
At a time when retailers are facing significant economic turmoil, it is paramount that they tackle the issue of returns head-on. Otherwise, they will find that they will be left with an abundance of second-hand stock and a dramatic fall in yearly profits.
Using data and tech to reduce returns
The first step any retailer should take in reducing returns is preventing consumers from purchasing unwanted or ill-fitting products in the first place. Retailers can do this by optimising keywords on Google Shopping in order to send people items that truly reflect searches. For example, if someone searches for a size 11 Dr Marten boot, then the top recommendations on Google Shopping need to be size 11 Dr Marten boots. Consumers will return products if they accidentally click on and purchase a boot that’s either not the intended brand or that is too big or too small.
Retailers should also look to Augmented Reality (AR). While consumers in brick and mortar stores can see if a product fits their own individual style, online shopping requires people to imagine how an item like a dress or a hoodie will look on them. As a result, online purchases can often lead to disappointment as the latest jacket may work for a model on sites like ASOS and Zara, but not for consumers after they try purchases on.
AR stops people from guessing by giving consumers a clearer idea of how a product will look on them. Consumers can map an item like a cap or a jumper onto an image of themselves on their camera. For example, brands such as Nike have used AR to project an image of their trainers onto a consumer’s feet.
If preventative measures don’t succeed, then retailers need to ensure that they use other measures to lower the cost of returns on their bottom line. A good example of mitigating post and packaging charges is Amazon. The e-commerce giant encourages consumers to return items through physical drop-off points.
While brick and mortar retailers have long made shoppers return products in-store, e-commerce players don’t have the network and the presence to adopt similar methods. Meanwhile, as retailers shut stores up and down the country, it stands to reason that even many traditional brands will struggle to provide a store space for all consumers to use for returns. What’s more, convenience is a key selling point in the e-commerce wars. Online brands like ASOS and BooHoo could follow Amazon’s lead and capitalise on their delivery networks by creating physical drop boxes in urban centres to reduce shipping costs.
Despite the high street reopening and footfall increasing, it is clear that e-commerce is here to stay. People have gotten used to shopping online. With that comes a significant long-term increase in returns. Retailers that adapt to prevent consumers from purchasing ill-fitting and unwanted products, as well as innovating around delivery and return postage solutions, will find that they are better able to drive profits and remain competitive in the coming months and years.
Liam Patterson is CEO and founder at Google Shopping tech platform Bidnamic