Managing retail returns is a critical aspect of running a successful retail business, especially during the peak shopping season around Black Friday. DeliveryApp had the opportunity to sit down with Dr. Jonathan Gorst, a division head at Sheffield Business School and expert in retail returns with over 20 years of research in the field. In his interview, Jonathan provided key insights into the costs, challenges, and future of retail returns, with a particular focus on how to manage them during the busy holiday season.
Meet Jonathan here and uncover how his research has focussed on minimising returns, mapping the product lifecycle and processes involved in returns:
One of the most eye-opening aspects of retail returns is their hidden cost. According to Jonathan, while many retailers estimate the cost of processing a return at around £7 per item, research suggests the true cost could be closer to £20. These costs quickly add up, particularly during peak seasons when return volumes skyrocket.
For example, many customers tend to overbuy with the intention of returning items later—purchasing multiple sizes or colours to try at home. This behaviour not only ties up valuable stock for weeks but also costs retailers in terms of shipping, processing, and repackaging. For lower-cost items, high return rates can significantly erode margins, making the process unsustainable in the long run.
One emerging trend in the retail industry is the push to extend the lifecycle of products. More businesses are now focusing on selling used products, whether through online platforms or brick-and-mortar stores. Unlike traditional charity shops, these businesses are commercially driven, which increases the perceived value of second-hand goods. As sustainability becomes more important to consumers, this shift offers a way for customers to buy products they value highly, whilst retaining the item’s original purpose and reducing the need for retailers themselves to process the products.
Educating customers about the actual costs and environmental impacts of returns is a delicate balance. On one hand, some larger retailers have started charging modest return fees—typically around £3—to encourage consumers to think twice before buying items they plan to return. However, retailers are generally hesitant to push too hard in this area. Statistics show that 75% of online shoppers won’t make a purchase unless free returns are offered, and educating customers could be perceived as making the buying process more difficult, which may impact conversion rates.
Brand loyalty plays a significant role in return rates. When customers trust a brand, especially when it comes to sizing and product quality, they are less likely to buy items with the intention of returning them. However, Jonathan warns that while technology like AI can help suggest sizes and reduce return rates, inaccurate suggestions can lead to customer dissatisfaction and even offence, ultimately harming the brand image.
Retailers need to be cautious when adjusting return policies, as even small changes can have large, unintended consequences. For instance, when some companies introduced a minimum spend for click-and-collect services, it led to customers buying additional items just to meet the minimum and then returning them, which only increased costs for retailers. Similarly, shortening return windows can cause a negative perception, even if the actual impact on return rates is minimal. Jonathan stresses the importance of a cost-benefit analysis before making policy changes, ensuring that the financial benefits outweigh any potential damage to customer loyalty.
Jonathan gave an example of a company that reduced their very generous returns policy to one that simply brought them in line with their competitors. Whilst the new policy was still generous, the brand’s audience perceived the impact to be greater and this led to a drop in share price. This was particularly hard to swallow as the returns curve shows that most returns are made within the first two weeks following a purchase, and so a minor change to the returns window will only minimally reduce the return rate for a brand but will have a much larger impact in the eyes of the consumer.
One often overlooked aspect of retail returns is their environmental cost. When items are returned, the journey back to the retailer is far less efficient than when they were initially shipped. Returns often come back as individual items, leading to inefficient pallet and container fills, which increases carbon emissions. However, Jonathan notes that the environmental impact may be offset if the returned product is reused for its original purpose rather than discarded or recycled into something else.
Omnichannel retail, which gives customers multiple ways to shop through a multitude of channels, can indeed help reduce returns. By providing customers with more opportunities to research the brand and product before they buy, customers have greater confidence and less need to buy with the intention of returning. A successful strategy implemented by some brands is providing information such as when an item is available in a nearby store to try on, enabling customers to make a short trip to see the product in person before they buy. This information gives them the confidence their trip won’t be wasted and reduces the likelihood of them needing to return their item, as they feel more secure in their purchasing decisions.
Retailers can also minimise returns by analysing data to understand why customers are returning products. Jonathan suggests benchmarking return rates for individual items to identify outliers and investigating why certain products have higher return rates than expected. The issue could be as simple as colours not translating well on a screen, or it could be a product defect. Identifying and addressing these issues early can help retailers reduce their return rates significantly.
It is understood that gaining these insights from consumers themselves is tricky and often unreliable and so retailers will need to collect a range of in-depth data to get a true picture of the reason for product returns.
Looking ahead, Jonathan believes we will see significant changes in how returns are managed. More retailers are beginning to introduce return fees, and while customers may resist at first, widespread adoption could change consumer behaviour. This shift may even drive a resurgence in high-street shopping as customers look to avoid return fees by trying items in-store before purchasing.
Another potential change could be within the courier industry. Currently, courier networks are squeezed by the high volume of returns, often leading to lower wages for drivers. As return fees become more common, they may help balance this equation, leading to fairer compensation for delivery workers.
In conclusion, retail returns are a complex issue, especially during peak seasons. As customer expectations evolve, retailers must find innovative ways to manage returns, whether through policy changes, extending product lifecycles, or utilising data more effectively. Jonathan’s insights remind us that while change is inevitable, retailers must be mindful of the customer experience and environmental impact as they navigate this evolving landscape.
—
Head to our blog to find more Peak Season insights and more interviews with industry experts.
