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Carriers are losing out to technology firms when it comes to capturing the traffic of rejected online purchases, partly due to lack of attention to returns.
A study commissioned by e-commerce technology provider Doddle, based on a survey of e-commerce retail businesses across five European markets – the UK, France, Germany, Spain and Italy – reveals an acute headache for online merchants.
More than half (57%) of respondents described returns as a significant, or very significant, problem. Of the small merchants with between 11 and 50 employees, 73% found returns a significant problem.
And addressing this issue is high on many sellers’ agenda, labelled a high priority by 49% of respondents, while 15% classified it as a very high priority.
According to the study, the average estimated return rate across the five markets is 23.44%. Granular return rates vary by sector and market, but on average, merchants selling on marketplaces or third-party websites had the highest return rates.
By one estimate, the return rate of cross-border sales is up to 30% of online purchases, costing around $100bn.
And the problem is getting worse: of the respondents in the Doddle study, 52% reported return rates on the rise, with 39% seeing no change. Numbers for the US market, from the National Retail Federation, show the rate of returns for online purchases there last year was 20.8%, up from 18.1% in 2020.
Cost is the biggest headache around returns, according to respondents to the Doddle study. UPS estimates returns of online purchases cost twice as much as those of goods purchased in stores. According to another report, Amazon largely refrains from returning rejected purchases to origin, preferring to destroy or resell items.
For merchants, a returns policy constitutes a balancing act. On the one hand, they are inclined to try to reduce returns to halt margin erosion, but on the other, they know this affects the customer experience, which has been conditioned by the free returns policies of Amazon and many other sellers. Many large retailers find the cost of returns is outweighed by future business from satisfied consumers, the study notes.
Merchants employ a variety of methods to handle returns, and none emerged in the Doddle study as a clear winner. However, the authors note that integrated returns portals where consumers enter the order number give merchants more control and better insights. Of respondents not already using a digital returns solution, 74% expressed interest in adopting one.
This is one area where carriers fall short in terms of dealing with the returns issue, the study notes. Overall, the authors found that most carriers had not made significant efforts to help merchants with returns.
They wrote: “Carriers have yet to be truly involved as true solution providers. While most provide a returns solution of some form, few have fully understood the intricate difficulties and challenges returns present to merchants and, as a result, the solutions are typically geared towards generating labels rather than solving those issues.”
Less than one quarter of respondents (24%) are using returns solutions provided by carriers. This puts them at a disadvantage, vis-a-vis technology providers, warned Doddle CEO Tim Robinson.
“What we’ve discovered in the research process is that few carriers are capable of offering a genuinely market-leading returns solution. Many are being disintermediated by third-party technology providers taking aim at the returns problem. In doing so, those technology providers are taking control of returns volume, and, perhaps more importantly, growing into a role that could rightfully have been that of the carrier, as a broader e-commerce enabler, rather than simply a mover of parcels.”
He concluded: “Carriers with a ‘not my problem’ attitude will struggle to adapt, and those with the best solutions for challenges like returns will be in the driving seat.”