Returns cost retailers 425.6 billion pounds a year

Retailers worldwide are losing around 425.6 billion pounds a year simply through customer returns, according to new research from retail analyst firm IHL Group, commissioned by OrderDynamics.

IHL’s report, ‘Retailers and the Ghost Economy: The Haunting of Returns’, shows the total cost of product overstocks, out-of-stocks and customer returns, and Europe accounts for a staggering 43.7 percent of the ‘ghost economy’ of all returns in the world.

The report reveals that the leading causes of retail returns were defective/poor quality, which accounted for 107.28 billion pounds in returns worldwide, representing 1 in 4 retail returns and 1.1 percent of total retail sales worldwide. This was followed up by consumers buying the wrong item, 65.76 billion pounds, and buyers remorse accounts for 58.74 billion pounds.

Other reasons include better price elsewhere, gift returns, wrong sizing on item, return fraud, didn’t match the online description, and late delivery of items.

The report suggests that up to half of all retail returns are at least partially “preventable,” as 221.5 billion pounds in returns are due to defects/quality, wrong sizing, the product didn’t match the online description, late shipment or the customer purchasing the wrong item, which in many cases can be improved by better online descriptions, and “better signage and training of associates” in stores.

“Merchandise returns can be a particularly vexing problem for consumers,” said Greg Buzek, president of IHL Group. “When merchandise is out of stock, shoppers typically just go elsewhere or purchase a different product, but if they make a purchase and then have to return it because of poor quality, improper sizing, late delivery or it doesn’t match the online description - it’s not only frustrating but often leads to a consumer ceasing to shop with that retailer.”

John Squire, president of OrderDynamics added: “While retailers can never completely eliminate returns, there are many areas in which they can improve their customers’ experiences and increase profits by minimising returns. For example, apparel retailers can standardise sizing across brands, offer personalised size guides and clearly communicate sizes to shoppers in all channels. But retailers need connected data across marketing, merchandising, returns and customer reviews to be able to recognise where these issues exist in the first place.”