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Home BUSINESS A tidal wave of returns hits the e-commerce industry

A tidal wave of returns hits the e-commerce industry

GRAMputting up a package delivered is easy. Sending it back is not. Repackaging, printing labels, and shipping it back to the seller is an increasingly familiar experience for online shoppers. In the United States, 21% of online orders, worth about $218 billion, were returned in 2021, according to the National Retail Federation, up from 18% in 2020. For apparel and footwear, it can reach around 40%. It’s a headache for retailers.

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The problem has its roots in the birth of electronic commerce. To compete with traditional sellers and make consumers comfortable with ordering online, e-commerce companies offered free returns. Consumers came to expect it. The scale of returns has been amplified by the covid-induced boom. In the United States, online shopping now accounts for 15% of retail sales by value, up from 10% at the beginning of 2019.

Yields could rise as nervous consumers cut back on spending. In May, Boohoo, a British online fashion firm, forecast lower earnings for the year, in part due to a higher rate of return. In June, Asos, a rival, did the same. Overstocking, as retailers miscalculate changing demand, adds to the problem. Steve Rop GotrgA startup that helps retailers sort through returns sees a rise in returns of discounted products as consumers realize they don’t want them.

Each step of the process is expensive. Retailers have to pay for products to be picked up or shipped. Returns processing is labor-intensive, explains Zac Rogers, who worked as a returns manager at Amazon and is now at Colorado State University. The checkout system is highly automated and streamlined; a statement needs to be opened and someone has to decide what to do with it. “A worker in an Amazon warehouse can pick up 30 items in a minute, but a return can take ten minutes to process,” says Mr. Rogers.

Once processed, retailers can only immediately resell 5% of returned products. Most go to liquidators at knockdown prices or are scrapped. Retailers typically get about a third back on a $50 item, says Optoro, a firm that helps with returns.

One solution involves adding friction. Last year, Uniqlo, a Japanese fashion brand, became one of the first retailers to charge a small fee for posted returns. Zara, a rival, did the same in May. Other companies, including Amazon, are selling more refurbished products as a way to cut losses.

Startups are getting in on the action. The use of artificial intelligence to help retailers decide what to do with returned products, taking into account factors such as price trends in second-hand markets, is the brainchild of gotrg. Happy Returns, another startup bought last year by PayPal, a fintech firm, helps with logistics. It has 5,000 return drop-off locations across the United States, primarily chain stores. Returns are aggregated and shipped to retailers all at once, saving up to 40% on shipping costs, says David Sobie, head of the company.

Some are experimenting with virtual reality (virtual reality). More than half of the items are returned because they are the wrong size. In June, Walmart said it will buy Memomi, an augmented reality (are) startup that allows shoppers to try on glasses virtually. Walmart also offers ways to try on clothes and rearrange furniture in rooms using are. Amazon recently released a virtual reality function that allows users to try on shoes. Retailers will now try virtually anything to reduce returns.

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