Business

Returns of online holiday gifts to hit record

NEW YORK, Jan 3 — After the holiday party comes the hangover for retailers: handling millions of returns this week.

With a Christmas season that has seen record e-commerce sales coming to a close, returns should hit an all-time high today for United Parcel Service.

Retailers are finding out that the friendlier the returns policy, the easier the sell. — Reuters picRetailers are finding out that the friendlier the returns policy, the easier the sell. — Reuters picThe delivery company expects to handle more than 550,000 returns today — a record — up almost 8 per cent from a year earlier. Several other days during the first week of 2012 would also top half a million returns, UPS said.

“This will definitely be the busiest year for returns,” Ken Burkeen, marketing director of the retail and consumer products division at UPS, told Reuters.

The good news for retailers is that most of the jump is simply a reflection of the explosive growth in e-commerce this Christmas season: US online sales were up 15 per cent between November 1 and December 26, according to data firm comScore.

Burkeen said UPS expected returns to rise 7.7 per cent, meaning returns as a percentage of total sales have actually dipped despite more customer-friendly return policies.

A lot of that has to do with how much better websites have got, including the ability to rotate the image of a product 360 degrees.

Diana Ku, a 25-year-old elementary school teacher from the San Francisco area, said she bought more from Nordstrom Inc, in part because of the quality of the photography on the upscale department store chain’s website.

Such improvements to many e-commerce sites have lowered the risk for a customer such as Ku of placing an order only to open a package and find the item was not what she was expecting.

Ku has yet to return a product she bought online this holiday period. “I do return quite a lot normally, but I didn’t this year,” she said.

It’s expensive for retailers to take back products they have already sold, check they are still in good condition, repackage them and integrate them back into inventory for resale.

Kurt Salmon retail strategist Al Sambar said that the returned items often ended up in the discount bin, meaning a further danger to margins during a holiday season that had already seen steep discounting.

But retailers have found that easier returns policies, online or off, can be good business.

Nordstrom this year stopped taking $6 off of refunds on returns when an item bought online is mailed back. Kohl’s Corp, a mid-priced department store chain, has long been praised by retail strategists for its policy of accepting returns without receipts.

Even when returns spike, that can be good news. If shoppers know they can bring products back to stores or mail them back to online retailers, they are likely to buy more from that retailer.

“Making it easier to return increases loyalty and doesn’t increase returns per se,” said Fiona Dias, chief strategy officer for ShopRunner, a company that manages returns and shipping for the e-commerce sites of retailers including American Eagle Outfitters and Toys R Us.

“If retailers make it difficult to return, the customer is left with an overall bad taste in their mouth about the brand.”

Electronics, clothing top returns

UPS was seeing a “surge” in returns of electronic devices, Burkeen told Reuters.

When consumers buy electronics online, they do not get a chance to try out the devices first. So often, after the products arrive, “they play around with the product and decide they would like to return it for another product”, he said.

Consulting firm Accenture last month estimated that returns would cost US electronics stores and makers US$17 billion (RM53.9 billion) this year.

Several top electronics retailers, including Amazon.com, Best Buy Co and Apple Inc, have extended their normal return windows to accommodate the large number of people who will need to initiate returns or refunds over the next few weeks, according to STELLAService, which rates the customer service of the largest retail websites.

Categories with the highest percentage of returns will also include apparel and footwear.

Such items are not easy to buy online because they need to fit properly, and require being tried on before consumers commit fully.

For such items, it is becoming common practice to offer fast, easy and even free returns, according to Jordy Leiser, chief executive officer of STELLAService.

Zappos, a unit of Amazon that sells mostly shoes and apparel, pioneered free shipping both ways — including returns.

ShopRunner’s Dias said that only about 10 per cent of retailers offered free shipping on returns but predicted that would grow quickly in the coming years.

Bonobos, a fast-growing online men’s clothing retailer, specialises in selling pants that fit right. A crucial part of its service is to allow consumers to mail back poorly fitting pants as many times as needed. — Reuters

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