eCommerce Returns as a Profit Driver

eCommerce is changing the whole retail landscape, customer expectations are increasing and they not only expect free and same day delivery. They also want free returns, this might cause a strain to the whole supply chain process.

Returns are often thought to be the most tedious, costly and overlooked process. The retailers will incur additional supply chain costs when a product is returned or exchanged. This returned item often cannot be resold at its original price, due to damage, wear and tear or obsolescence. This is especially an issue with fashion or seasonal products. Returns of brick and mortar purchases tend to hover at 8%, while eCommerce returns can reach as high as 15% to 30%.

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What items are returned the most

It is not surprising to find out that the most common category of returned purchases are clothing and accessories. Following closely are electronics and shoes.

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Returns are no longer the exception

In today's eCommerce driven environment, free shipping can be found in almost every website, and "hassle-free" returns and exchange are increasingly common. Retailers have made returning so easy to encourage the purchase and reduce the perceived risk associated with buying online. This results in consumers taking advantage of lenient return policies to purchase items in different variant and colours to make sure that they get what works for them.

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(Narver & Return Magic Survey)

While retailers become more customer responsive, they have to adapt to these changes to their supply chain model. These changes include adding workers, increasing warehouse space, and set up separate departments to handle reverse logistics. Designing a reasonable return policy is a crucial part of developing your business strategy. If not done correctly, customers will develop distrust in a brand that doesn't offer an easy way to return purchases that don't fit, arrive damaged or just not what they expected. Return policies are essential in the consumer’s purchase decision. Additional factors affecting online purchase includes the price, quality of the product, delivery cost, and return policies.

Consumers have grown to expect fast and free shipping and free returns; they no longer consider these offerings added perks. Free returns or exchange are the number two reason that makes consumers "more likely to shop online."

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Returns as a profit driver

Returns are not necessarily money lost; the value of establishing a sound returns policy and supply chain is far outweighs the cost of damaged or used goods. While retailers can lose a sale because of restrictive return policies, having an easy and flexible policy brings about increased sales, improved customer experience and brand loyalty.

Zappo found that delivering exceptional customer service is the new marketing and its lenient return policy is indeed a profit centre. "Our best customers have the highest return rates, but they are also the ones that spend the most money with us and are our most profitable customers."  says Zappos' CEO, Craig Adkins.

Based on Narver consumer report on the state of returns, 60% of eCommerce customers will make at least one return or exchange per year, of these customers that return the products, 95% will make another purchase based on a good return experience.

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Difficulties with implementing an effective reverse logistics

More than half (52%) of managers admit they don't have appropriate processes and tools in place to determine if returned goods should be discarded, returned to the vendor or moved quickly back into inventory. The same study also disclosed that 44% of distribution centre managers consider returns a challenge to their operations.

If the supply chain is not prepared to accept these returned goods, these items will be stored and unrecognised as current inventory in the warehouse. It will only be discovered at a later date during physical counts, resulting in losses and wastage.

The Reverse Logistics Association explains that the return and repair processes alone contribute to at least 10% of overall supply chain costs. But if the reverse supply chain process is inefficient it can cost the organization to reduce its profit by 30%.

Logistics partners that manage your returns

With the increasing trend of eCommerce returns, retailers will realise how returns can eat into the company’s profit and if not managed properly will threaten their business.


UrbanFox has a robust reverse logistics process in place to create an efficient reverse logistics process that provides the service and support retailers require to deal with the needs and raising demand for returns in eCommerce. UrbanFox manages different types of returned products, ranging from fashion, beauty products, athletic wear and food products. Our delivery personnel will collect the item from the customers, the product will be returned back to our fulfilment centre and it will pass through a round of quality check before the decision to dispose or returned back to the stockpile. This in turn helps businesses achieve efficiency when accounting for returns and reduce the cost of returned articles. In the case of the fashion industry, waste is minimized when items that are still in good and acceptable condition but simply returned due to incorrect size or colour. Although returns are the new normal, if implemented correctly returns can be both a competitive advantage and a tool to build your customer loyalty.