The e-commerce market has boomed in recent years. But, with the growth in sales, the number of returns has also increased significantly. Whereas online stores used to entice consumers with free returns, it is the major brands such as H&M and Zara that have recently started charging fees.
By doing so, they want to reduce the cost of those increasing returns. Many online stores want to follow suit, but are afraid of the consequences. Is that justified? Returnista dived into the data and they show surprising results.
The increase in the number of returns
E-commerce is expected to continue to grow strongly. Several articles show that the market will grow to 1,200 billion by 2025. With this growth, e-commerce experts also expect the number of returns to increase from 1.5 billion in 2021 to 2.5 billion in 2025.
That returns are increasing need not be a commercial headache, as long as sales are increasing faster. But that's precisely where the problem lies. Indeed, as many as 91% of retailers report that return rates (number of returns : number of orders) are currently rising faster than sales growth.
Major brands start charging fees
With return rates rising faster than sales growth, major brands H&M, Zara and Boohoo have announced they are moving away from free returns. Consumers will bear the cost of returns.
The question many online stores are now asking is whether they will follow suit. Returnista has looked at 300,000 orders and comes up with an opinion.
Free returns vs charging fees
Data shows that the return rate of paid returns is 24% lower than free returns. When you look at the total value of those returns, it saves a merchant 41% of the cost.
This result is not very surprising. But what does stand out is that online stores that charge fees show better numbers financially when you compare the lower conversion (due to paid returns) with the coverage of the costs.
Olivier Muller, CEO at Returnista explains, "What we see is that online stores see the number of sales only slightly decrease the moment they charge. But when you set that against the costs you save by passing on returns to the consumer, at the bottom of the line you keep more."
When asked if he would advise all online stores to switch to paid returns, his answer is, "Of course it's up to the online stores themselves to decide that. But based on the figures, at least you don't have to stick to free returns."
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