Image symbolizing the passing of money from the retailer back to the customer during the returns process.

5 Sneaky Return Expenses Every Merchant Must Know

Retailers face many challenges when it comes to selling online. But of all the challenges faced, none is as daunting as dealing with returns. Why?—Because returning merchandise bought online is far more complex (and, therefore, costly) than returning merchandise bought in-store.  Bracketing, per-parcel rate adjustments from major carriers, and additional staffing are just a few of the returns expenses every merchant must know. 

Carrier costs

From managing integrations and relationships, to understanding the nuances of service-level agreements and customer expectations, a lot of time, energy, and money is required to maintain a healthy carrier network. The more robust the carrier network (number of carriers partners + number of geographies served), the higher those operational expenses go. 

For example, most carriers provide their data in different ways, which means retailers must be prepared to create unique integrations that mesh with every single carrier they use (consuming a lot of costly IT resources in the process). There is no way around building these integrations as, without them, it’s not possible for retail shoppers to track their returns. 

Environmental costs

A few years ago, research conducted by Fast Company discovered that shoppers in the U.S. received more than 160 billion packages per year (a number that surely falls short of today’s delivery volume). 

Now, imagine that half of those packages (80 billion) contain a traditional, single-page packing slip. Given that the average tree sent to a paper mill yields 15,000 sheets of paper, retailers are wasting a forest’s worth of trees each year on packing slips alone. Factor in many of the other environmental expenses tied to reverse logistics—fuel consumption, CO2 emissions, excess packaging, product disposal, etc.—and it becomes crystal clear how costly inefficient returns processes are to a retailer’s ESG goals. 

Carrying costs

Not to be confused with carrier costs, carrying costs are tied to all the little actions required to reacquire, refurbish, and store returned merchandise before it can be resold to another consumer. 

Adding to these costs is the fact that, for many retailers, merchandise is seasonal—in which case, many returned products must be stored for a full year before they can be resold. Often, it’s cheaper to recycle, destroy, or simply let the customer keep the returned item than it is to store it for resale. 

Peak-Season costs

For most retailers, there are certain times of the year that are busier than others, with the busiest being the holiday-shopping period (a.k.a. peak season) which starts in September and runs through December. 

Supporting return operations during these seasonal swings, but most especially peak season, requires planning, agility, and a whole lot of items that come with a price tag (warehouses, trucks, additional staff, etc.). Of particular note is the cost of employing customer service agents to help process returns. Each customer service ticket costs retailers as much as $5, so when return inquiries (refund initiation calls, where is my refund calls, etc.) to customer service agents spike, so too does a retailer's cost of doing business. (Fortunately, reducing returns-related inquiries to customer service agents is easy to remedy.)

Convenience costs

Businesses and brands everywhere are striving to cater to a consumer that’s more convenience-oriented than ever. 

For years, retail shoppers focused on acquisition-related convenience—perks such as next-day or same-day delivery. But now, shoppers want extreme convenience in their returns experience which is why more and more retailers are adding home pickup. 

Unfortunately, orchestrating home pickup is a complicated and costly burden for any retailer to shoulder on their own. 

That’s why the most future-focused retailers are partnering with reverse logistics experts to handle high-convenience returns offerings (such as home pickup) on their behalf. These experts connect retailers with vetted carriers and couriers, eliminating the need (and the cost) of reviewing and signing contracts, managing relationships, and handling IT integrations. 

How can retailers reduce their return expenses?

Returns are an opportunity for retailers, not an expense. As experiential expectations play a growing role in customer purchase decisions, being able to offer shoppers an array of options for returns is critical. Done right, returns pad retailer profits through enhanced loyalty and higher lifetime value. 

That being said, there are several things retailers can do to reduce their returns expenses:

  • Use more advanced logistics software to assist in faster product grading, sorting, and routing, which leads to faster restocking, recycling, and reselling.
  • Tap into an existing global logistics network of over 200,000 drop-off points via 300+ carriers to avoid the hassle and expense of relationship and IT management.
  • Deploy package aggregation, intelligent dispositioning, and freight consolidation to minimize returns-related shipping costs. 
  • Provide easy, convenient product exchanges to recapture up to 35% of revenue and offset returns expenses.
  • Offer proactive returns-related updates via email and SMS, dissuading customers from initiating costly calls to customer service.

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