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Returns Reduction is a $125 Billion Opportunity for the Retail Industry According to New Research from Incisiv and Newmine
73% of returns occur due to a retailer-controllable action, but only 16% of retailers have a strategic initiative focused on reducing returns
JACKSONVILLE, FL –(BUSINESS WIRE)–According to the National Retail Federation, U.S. retail returns totaled $428 billion in 2020. The problem is getting worse, too. eCommerce return rates are typically 2-3 times higher than store-bought purchases, and as eCommerce adoption grows in 2021 and beyond, retail returns will only continue to increase.
However, retailers can take steps to reduce returns. Incisiv’s “2021 State of the Industry: Retail Returns” study, commissioned by Newmine, reveals a 30% improvement potential in average retail return rates, representing a $125 billion returns reduction opportunity for the retail industry.
“However, it is time retailers realize a large portion of returns are preventable by action on their part. With eCommerce adoption increasing, retailers who focus on returns reduction sooner will be better positioned for future growth and profitability.”
Understanding the Full Impact of a Return
Even though 84% of retailers believe there is significant ROI in returns reduction, few understand the full business impact. Beyond the financial impact of a return, retailers must consider customer, brand and environmental factors. For instance, 42% of shoppers will stop shopping at a retailer upon multiple retailer-induced returns, and 72% will post a negative rating or review. However, only 4% of retailers consider customer, brand or environmental impact while calculating the cost of a return.
Putting Returns Reduction on the Leadership’s Radar
Retailers must put reducing returns near the top of their C-suite’s priorities or risk underperforming on financial, customer, brand and environmental metrics. Incisiv’s survey reveals a lack of leadership focus and ownership:
- 78% of retailers say reducing returns is not a strategic priority for their C-suite
- 97% do not have an identified executive owner responsible for reducing returns
- Only 16% have a strategic initiative focused on reducing returns
Returns are a Factored-In Cost of Doing Business
Factoring returns into the cost of doing business is the top challenge preventing retailers from reducing return rates. In fact, 81% of retailers factor baseline return rates into their merchandise planning process.
“The data clearly outlines the uphill battle that retailers face when it comes to returns reduction. For too long, the retail industry has accepted the fact that returns are just a cost of doing business and that other strategic initiatives should take priority; 75% of retailers prioritize having a good returns experience over reducing returns,” said Gaurav Pant, Chief Insights Officer, Incisiv. “However, it is time retailers realize a large portion of returns are preventable by action on their part. With eCommerce adoption increasing, retailers who focus on returns reduction sooner will be better positioned for future growth and profitability.”
“Retailers must put an equal or greater focus on reducing returns as they do on improving shoppers’ returns experience,” he continued.
Opportunities for Improvement: Moving Beyond The Cost of Doing Business
Despite the challenges of retail returns, they are not a foregone conclusion or a cost of doing business. Returns reduction is an active, immediate and achievable opportunity for retailers.
- 73% of returns occur due to a retailer-controllable reason, e.g. issues with product fit, product quality, fulfillment errors or inaccurate product content, among other reasons.
- 71% of retailers do not have a good understanding of the root cause of their returns.
"Newmine is on a mission to turn returns on its head. Returns intelligence and reduction can improve customer experience, retailer profitability and environmental sustainability," says Navjit Bhasin, Founder and CEO of Newmine. “We have been studying returns for several years and are impressed by the depth and breadth of insights Incisiv has delivered that both validate our mission and provide new perspectives to the marketplace.”
The research study is based on a CATI (computer-aided telephonic interviewing) survey methodology spanning 107 retail executives and 2,500 US shoppers. The survey was conducted between March 4 - March 19, 2021.
Incisiv is a next-generation industry insights firm that helps retailers and brands navigate digital disruption in their industry. Incisiv offers consumer industry executives responsible for digital transformation a trusted platform to share and learn in a non-competitive setting, and the tools necessary to improve digital maturity, impact and profitability. More information is available at incisiv.com.
Comprised of former retail and supply chain executives with deep experience in retail strategy, operations, and technology, Newmine’s vision is to ensure retailers thrive in a transforming world. Newmine seeks to disrupt the returns management market with AI-driven returns reduction solutions. Newmine’s Chief Returns Officer® is an AI-powered platform that gives retailers a holistic view of integrated returns-related data from across the enterprise, prescribes corrective actions, and enables collaboration. www.newmine.com