The impact of eCommerce return rate on your business
eCommerce return rate has become a major concern for many eCommerce businesses. Many customers have started returning products for different reasons. Customers returning products put up a lot of cost on the eCommerce business.
The reasons for customers returning the products might be many. However, now it’s seen that many times people order more items with the intention of returning a few of them. Now, the scenario is that businesses have to hire more customer representatives and set up separate departments for managing reverse logistics.
eCommerce returns have become the new normal and an important factor in the customer experience. People often look for eCommerce websites that offer free shipping and returns. But this has become a major issue for eCommerce stores.
To gain a competitive advantage and be the first choice of customers, they often offer free shipping and returns. This has resulted in them getting in losses due to high eCommerce return rates.
Here, in this blog, we will talk about how to handle eCommerce returns, how to calculate rate of return, and ecommerce returns best practices.
What is the eCommerce return rate?
eCommerce return rate refers to how frequently your customers return the purchased products or items to your online store. Your eCommerce return rate is the percentage of products returned compared to the total products purchased.
It has become important for eCommerce to understand why customers return their products and how they can prevent it. Next, we will tell you how to calculate your eCommerce return rate.
How to calculate return rate eCommerce?
Calculating the eCommerce return rate is very easy. You just need to divide the number of products returned by the total number of products sold and multiply it by 100. For instance, you sold 10,000 products in the last six months and 900 of them were returned. Then, the eCommerce return rate can be calculated as follows:
Here, you can see your eCommerce return rate is 9%. However, by calculating your eCommerce return rate you can’t know the reasons behind returns. You must ask your customers the reason why they opt for returning a product.
What is the average eCommerce return rate?
The average return rate for eCommerce is higher compared to the brick-and-mortar store. eCommerce return rates can be 2X to 3X higher than the physical stores. The main reason behind this is that the customers can’t see, touch, and feel the product while buying online.
Customer behaviors and journeys are totally different for both an eCommerce and a physical store. According to a study, 63% of customers have accepted that they have returned at least some of the products they purchased online.
Average return rate statistics for different channels
- The average eCommerce return rate is 16.5% for online stores.
- The average return rate for brick-and-mortar or physical stores is 9.7%.
- The average return rate during the holiday reason is 17.9%.
- The return rate decreased by 20% compared to the average eCommerce return rate during the start of the pandemic.
From the above eCommerce return rate statistics, you must have understood that return rates vary depending upon various factors like the time period and circumstances. Let’s now understand the top reasons that cause a high eCommerce return rate.
Top reasons for eCommerce returns
We all know that no matter how hard we try, sometimes we can’t satisfy customers. You can’t ask people to order fewer items and return none of them. This is beyond the control of an eCommerce business. But what we can do is find out the eCommerce return rate reasons and try to diminish them from the base.
As per the report by eMarketer, the average return rate eCommerce is around 20-30%. Now, let’s look at the eCommerce return rate statistics to understand the eCommerce return rate reasons.
- 80.2% of customers return the product because it is damaged or broken.
- 64.2% of customers go for product return as they find the product doesn’t match its given description.
- 37.2% of customers simply return the product as they don’t like it.
- 7.5% of customers return the products as it offers poor value.
- 7% of customers opt for product return because it is delivered late.
To tackle the eCommerce return rates you need to work on the root cause of eCommerce returns. Now, let’s have a look at eCommerce return rates by product category.
The costs behind eCommerce return rate
Here, we will understand the different costs that go behind the product return process. When a customer returns a product there had already been costs put to deliver the product by the retailers.
- Cost of delivery and labor: An eCommerce needs to maintain a warehouse, carry out shipping, take up the travel cost, labor costs, and deliver the product. This all requires high investment and expenditure from retailers.
- Cost of damaged goods: When a damaged product is returned, the company needs to discard and scrape it. This additionally requires them to put costs into the disposal process.
- Cost of faulty products: Sometimes, the product is not completely damaged but has some small fault. In this case, the company needs to provide them with a replacement or a full refund.
- Reselling the product: To resell the returned product, the company needs to repack or renovate the product which requires them to spend money again.
How to handle eCommerce returns?
Handling eCommerce returns is another task for a company along with processing and delivering other orders. In this section, we will tell you how you can manage your ecommerce return rate with these best strategies.
1. Post the product back to the warehouse
This is the best eCommerce returns process for eCommerce brands that don’t have a physical store. When a customer wants to return an ordered product then they can post it back to your warehouse. From there the production department examines the product and confirms if it’s eligible for refund.
These days there are many return management apps that you can use to fasten up your return management process. This way you can easily update your inventory management system and give customers the status of their return.
2. Ask people to return items to your store
You can ask people to return the products to your physical store. This way you’ll easily be able to manage the return. If the products are not damaged and in good condition then you can keep them to resell to other customers.
Store returns are convenient for a company but it also brings customers to the store. This way even if they are returning a product, there are chances they might like something else in your store. Also, for the customer who has a size fit issue, they can get it exchanged for a bigger or smaller size. This way you can build their trust in both online and offline shopping with your business.
3. Partner with third-party logistics
As you know eCommerce returns management is a time-consuming and long process. It’s not necessary that you always do it in-house with a team. You can outsource your return management by partnering with third-party logistics. They can handle your entire order management process from delivering to handling eCommerce returns.
When a customer returns a previously ordered item to third-party logistics. They examine the product and process the refund. If the product is in good condition it is kept at the warehouse to be packed again when it’s ordered by another customer.
eCommerce returns best practices
It’s not possible to eliminate the eCommerce return rate from the eCommerce business. But you can prepare and follow eCommerce returns best practices to reduce your eCommerce return rate.
1. Have a transparent product return policy
How to reduce returns in eCommerce? You should have a clear and well-defined product return policy. The customers should know the conditions for return. You should also define what products are eligible for return or refund. Ask customers to return the product without using or damaging them. Thus, it’s importa nt you inform customers about your return policy before they purchase a product. This way you can increase your sales and reduce the eCommerce return rate.
2. Use high-quality images and videos
The more people know about what they are actually purchasing, the less likely they are to return a product. Try to provide as much detail as you can provide to customers about a product. Add high-quality images and videos of the product to help people know how the product will look in real life.
When it comes to shopping online, most customers judge the product on the basis of their images and videos. You should add product images from different angles so as to provide a complete view of the product to the customers. Try to add five or more images to make people sure about the product before they make a purchase.
Also, add product videos to go beyond the 2D images. Nowadays, many eCommerce platforms have started using AR/VR technologies. For example, on Nykaa you can try lipsticks virtually and see how they’ll look on your face. This facilitates accurate decision-making by customers and a reduction in eCommerce return rate.
3. Add good product descriptions and customer reviews
You must include accurate and detailed product descriptions to provide complete information about the product to the customers. When people know what they can expect from a product, there are less chances of them being disappointed when the product actually arrives. To reduce your eCommerce return rate, you must include product information like weight & dimensions, ingredients, size guides, directions to use, and eCommerce returns policy.
Informing your customers about the products will help them to know about the product completely. They can check the ingredients list and see if they are allergic to any ingredient before they place the order.
4. Pay attention to the packaging and shipping of items
You might think once you have packed the items from the warehouse, they will be delivered perfectly. As per the eCommerce return rate statistics, 30% of the products are returned because they are delivered faulty or damaged. You need to see where you went wrong, whether it was bad quality packaging, the transit where the products were kept, or the careless transporting of the products.
You should check and find out the reason behind the products arriving damaged. Make sure you use good-quality packaging and protective material like bubble wrap, PE foam, cushions, etc. You can also add fragile labels on the packages so that they are handled carefully during transportation. Look for the right size packaging boxes for different products so that they don’t move around too much.
By paying attention to the packaging and shipping of items you can reduce your eCommerce return rate and increase customer loyalty.
5. Make your eCommerce returns process simple
As per the statistics, three-quarters of customers tend to shop from eCommerce websites which makes their return process sustainable. Also, 71% of the customers would be willing to pay more to return with a sustainable option.
By minimizing your eCommerce return rate, you can reduce your brand’s carbon footprint. Try to reduce the usage of plastics and polythene in your packaging. You can also avoid the returns label so as to make your returns process sustainable.
What you can do in case of eCommerce returns?
Many times products are returned by customers due to genuine reasons. But sometimes, the customers order extra products with the intention of returning some of them. Therefore, it’s important you put some conditions for product return.
1. Blacklist customers
Keep track of your customers and their behavior with your brand. If you see a customer who frequently cancels or returns their orders without an appropriate reason, you can put them on the blacklist. You can disable the cash-on-delivery feature for them to reduce your return rate ecommerce.
You can also notify customers if they have returned your products excessively. Next, you can charge a delivery return fee after a customer has returned products too many times. You can set up a criterion for deciding when to put a customer on the blacklist.
2. Refund the money to their app wallet
If you want to reduce your eCommerce return rate, you can ask customers if you can return their money on the app wallet. You can provide customers with a special wallet for your eCommerce website apart from other payment options. In this wallet, people can transfer money and use it to buy products from your website.
In case when they want to return a product purchased from your website, you can ask them if you can transfer this amount to their wallet. This way you can reduce the eCommerce return rate and encourage more sales from your website.
3. Have multiple product quality checks
When a customer returns a product, it causes loss for the eCommerce business as well as the environment. To reduce your eCommerce return rate, you can have multiple quality checks at the supply and delivery chain. This way you’ll be able to find the faulty and damaged products at the early stage and minimize the loss. You can also have resellers and upsellers who can take the damaged products from third-party centers and resell them further.
eCommerce return rate: The Conclusion
eCommerce return rate tells you about the number of dissatisfied customers and the success of your brand. The more people are satisfied with your products, the less are the chances of them returning your products. However, the other side to it is that people order more products intentionally to return a few of them later. Some people even use the product once and return it.
The eCommerce return rates have increased excessively in the last few years. For eCommerce brands, it has become vital that they understand the genuine return reasons and try to prevent them. This way they can reduce their ecommerce return rate and avoid losses.
Webmaxy eGrowth is one of the best eCommerce return solutions that can help you manage your eCommerce store effectively. It comes with a wide range of features that can aid you in making strategic and smart decisions. It comes with features like a KPI dashboard, Conversion Dashboard, Marketing Insights, Audience Segmentation, Marketing Automation, Social Campaigns, Email Marketing, WhatsApp Marketing, WhatsApp Commerce, Customer Loyalty, Omnichannel support, and Retargeting ads.
Schedule a call with our experts to learn more about Webmaxy eGrowth, or email us at [email protected].
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eCommerce Return Rate: FAQs
What is an ecommerce return?
An eCommerce return refers to when a customer returns a product or item bought from an ecommerce store or app. An ecommerce return might happen due to reasons like size/fit issues, received damaged product, quality, poor value, delayed delivery, etc.
How do I avoid returns on ecommerce?
People might return products due to different reasons. You can avoid ecommerce returns by implementing the following proven ways:
– Add high-resolution images & videos.
– Give detailed product descriptions.
– Provide product size guides.
– Ask customers to add reviews
How can e-commerce reduce return rate?
eCommerce can reduce the return rate by focusing on the factors that cause customers to return the products. We have given some ways by which you can reduce the ecommerce return rate.
– Have multiple quality checks.
– Present your products accurately.
– Pack your products carefully.
– Have a clear and well-defined returns policy.
What is a typical return policy for e-commerce?
A typical return policy for e-commerce is that a customer can return a product within 15-30 days and ask for an exchange or refund. The items purchased from eCommerce have a time frame during which a customer can return a product. The return policy for different ecommerce sites can be different.
How to calculate return rate ecommerce?
Calculating the ecommerce return rate is very easy. You just need to divide the number of returned products by the total number of products sold and multiply it by 100. For example, if you sold 100 products and 10 of them were returned. Then, your ecommerce return rate would be 10%.