Holiday shopping is an exciting time for both consumers and retailers. For online retailers, it means increased sales and revenues compared to the rest of the year. Consumers are excited about purchasing goods for themselves (or as family gifts)—all with the best discounts and offers!
On the flip side, the holiday season also brings a sudden surge in the volume of returned products. According to industry estimates, product returns in 2024 are expected to account for 17% of all retail sales in the U.S., valued at $890 million. This is an increase from the 15% (valued at $743 million) recorded in the 2023 season.
Online shoppers are becoming ever more comfortable with the trend of purchasing and returning products. 46% of customers have returned their purchased stuff multiple times each month in 2024. Despite the convenience this offers to their consumers, product returns are a serious “hangover” for eCommerce retailers post every holiday season.
Understanding the challenges of product returns for online retailers
Online shoppers expect a smooth and seamless returns process from most retail brands. Rising customer expectations are one favorable factor in transitioning shoppers from physical “brick and mortar” stores to online eCommerce platforms. Thus, a below-par returns process can impact the customer experience and brand expectations.
A slow and inefficient returns process is expensive for most eCommerce retailers. Every returned product goes through an exhaustive reverse logistics process – before they are available for resale. Depending on its type, returned products can take multiple weeks (or even months) before they enter the inventory stock.
Additionally, retailers have to lower the resale price of their “off-the-shelf” products. According to the 2023 State of Retail report, 42% of returned products are sold at a discounted price, while 12% are not resold at all. The report highlights that returned items suffer an approximate loss of 38% from their original price.
Retailers must also address the challenge of manually processing returned products – as well as the growing shortage of workers. 32% of online retailers blame their inefficient returns process on manual operations, while 26% cite labor shortage as the main reason. To meet their growing demands, retailers are opening more order fulfillment and delivery centers across urban centers. However, these centers generally operate with fewer employees.
A Deloitte report estimates that retailers need at least 1 million more workers to achieve operational efficiency. In the post-holiday season, retailers can deploy this workforce to manage the surge in returned products.
What makes efficient returns management a challenge is that it’s not an isolated or independent process. This process is closely integrated with other retail processes like:
- Inventory management
- Order fulfillment
- Supply chain & logistics
For efficiency, retailers need real-time operational visibility across the entire product lifecycle – from procurement, distribution, and returns. This cohesive ecosystem is vital for the smooth flow of products and supporting resources.
Why retailers must view product returns as an opportunity
Despite the multiple challenges, product returns also present retailers with a golden opportunity to boost customer retention. While online shoppers returning products double during the holiday season, these customers also have a retention rate of 26%. This percentage is double (13%) the retention rate of those customers who do not return their products. Besides, their average order value is 27% higher than customers who don’t make product returns.
These numbers indicate that retailers have a golden opportunity to use product returns to improve their customer engagement. For instance, they can encourage repeat business with these customers by offering them conveniences such as:
- Free product returns
- Same-day returns
- Automatic refunds
- Extended timeframe for returns
78% of shoppers buy more products over time when retailers promise them free returns. By automating their warehouse operations, retailers can optimize their returns process and ensure returned products are back in the sales process in quick time. For example, with omnichannel fulfillment options like “Buy online return in store,” retailers can encourage online shoppers to return their purchased items at the nearest store.
How Carte+ can make product returns profitable
At Cartesian Kinetics, we understand the challenges posed by the holiday shopping season for modern retailers. By locating order fulfillment centers in proximity to customers, retailers can streamline both fulfillment and reverse logistics to meet their customer’s expectations.
Here’s how our Carte+ automation solution for warehouses can make product returns more profitable:
- Easy and quick installation of warehouse automation without any floor preparation.
- Minimized use of heavy equipment for material handling.
- Standardized racking system to accelerate the processing of returned products.
- Streamlined inventory management to restock, reuse, or resell returned products.
- Easy integration with third-party systems such as warehouse and inventory management.
With the Carte+ solution, retailers can retrofit their existing facilities to handle product returns – instead of investing in new facilities. This helps them save both time and expenses.
Are you unable to manage your high volume of product returns? Carte+ can address these challenges. Reach out to us today!
