Return rate in the online retail: How can I avoid returns?

Returns in online commerce are annoying, but are part of the business. For e-commerce shop operators, the question therefore arises: How can I reduce the return rate, save costs and minimize returns from the outset? Because every return is associated with a loss of value of the goods and renewed service costs. 

However, the corona pandemic has brought one advantage. The return rate has decreased over the past two years, while the number of online orders has increased . Customers take more time to compare the goods in advance and select the best product. According to a study by the University of Bamberg, about 25% more orders were shipped in 2020 than in the previous year, while returns fell from about 18% to 16%. 

In our article "Return rate in online trading: How can I avoid returns?" we now discuss why returns occur in e-commerce, how you can reduce the return rate and what the statistics say about returns in the B2C sector!

Statistics on the return rate

The number of return parcels in 2020 was 315 million in Germany. In 2018, a total of 490 million items were returned. The highest return rate in online retail is in clothing, closely followed by leisure articles, electronics and home.

Due to the constantly increasing number of online shops, competitive return periods and free returns are already the norm in e-commerce. Customers expect a 14-day withdrawal period and a free return slip, to easily return the goods to the retailer.

Average return rate for online shops
The article-related return rate has averaged around 20% in recent years. In the field of fashion, there are often more than 50% returns, in media only 10%.

The University of Bamberg has now compiled a detailed study on the return rate in the three largest B2C areas at the Institute for Returns Research. The return probability of a parcel / item was analyzed by surveying consumers between 16 and 29 years of age, with a focus on varying payment methods.

Probability of returning a package: Alpha Quote*

Return probability of an item: Beta Quote*

Return probability by gender*

What are the reasons for returns?

There are many reasons for a return. Long delivery periods, a complaint of the goods or even a wrong delivery.

• To long shipping

• Complaint

• Wrong delivery

In some cases, however, the return rate has less to do with the dealer and more to do with the customer. 

Especially in the fashion sector, several pieces of clothing are ordered in order to compare them at home according to size, colour or wearing comfort. Especially for wholesalers such as Zalando or Otto, who offer free returns, rates of over 50% often occur. 

Increased return rate in online trading due to the right of withdrawal

Unfortunately, it also happens that customers order goods that they do not want to buy. Why pay for something when it's so easy to borrow anonymously? 

This can be, for example, a great evening dress, which is only worn at a special event; the latest Bluetooth speaker, which is ordered from several suppliers and is only taken over by the fastest seller; or trying out an article for a short period of time just for fun.

Goods that are used without being purchased:

Fashion 7%

Leisure time 3,68%

Elektronic 2,22%

Living 1,96%

Media 1,12%

Toys 0,95%

Dog & Cat 0,42%

Health 0,33%

Office 0,09%*

Since the right of withdrawal in many e-commerce stores often includes a 14-day return period , some customers use goods without ultimately paying for them. This can lead to problems for the retailer if the goods are returned in a worse condition than they were shipped. Fortunately, however, the number of consumers with questionable intentions is relatively small.

How can I calculate the return rate?

The return rate can be easily calculated. Divide the number of returned packages by the number of packages sent and multiply by 100. You already have the rate of returns.

Alpha Quote

Beta Quote

This not only lowers the rate of cart abandonment, but also increases conversion and sales. Because only if customers choose the right product, which exactly meets their expectations, they want to keep it in the end.

What are the costs of a return?

In any case, a return incurs costs that you should avoid at all costs. In order to reduce return costs, it is therefore helpful to analyze the total cost of a return in your online shop in order to understand at which point in the customer journey you can optimize the returns process.

After all, there are costs for packaging, shipping, transport, as well as customer service at the return packing station. On average, you can expect 10€ per return. However, the exact price depends on the total number of returned packages, the number of products shipped, as well as the value and packaging of the goods.

Even if more returns are to be expected in the fashion sector , the processing fees for the returns process are lower here. In the B2C electronics sector, on the other hand, there are fewer returns, but the costs are higher because the packaging and maintenance of the devices is more expensive. A brand new phone quickly loses value if it is delivered to five different customers who return it after 14 days, and the phone is no longer brand new when it ultimately finds a loyal buyer.

According to the University of Bamberg, the average number of processing costs for less than 10,000 returns is 17.70€ in the online shop, 6.61€ for 10,000 – 50,000 returned parcels and 5.18€ for over 50,000 returns .

How do I reduce returns in the online shop?

In the last two years, the return rate has already decreased, even though online trading is booming. Customers are more conscious and more likely to buy products they actually need rather than goods they just "want". The change from luxury and abundance to practicality has thus caused a natural reduction in the return rate in eCommerce.

Home fitness equipment orders have increased 200% during the pandemic, while apparel stores are reporting 30% more orders but 5% fewer returns. A win-win situation for everyone involved!

Do you want to reduce returns in your online shop? Then optimize the following aspects on your website:

• simple navigation within the shop
  
  
• digital product advisors such as Guided Selling
  
  
• optimized search function like Faceted Search
  
  
• detailed product descriptions 
  
  
• simple delivery and return rules 
  
  
• no hidden costs

An easy-to-navigate webshop is the be-all and end-all for every online retailer. This includes an appealing user interface, optimized for mobile and desktop, a highly defined search function, detailed product descriptions, as well as clear shipping and return conditions. The customer should easily and quickly find his desired product and know exactly what he is ordering. 

The more precisely you describe your items in the online shop, the better your customer knows what he is buying. This avoids surprises when using the goods and thus reduces the return rate!

A digital buying advisor is also an optimal solution to accompany customers from the visit of the landing page to the right product and to advise them at every touchpoint. The tool is based on artificial intelligence and evaluates the needs of customers in seconds. Through appealing graphics and targeted questions, the selection for the customer is further reduced, so that desired product is found quickly.

If you want  to reduce the return rate in your online shop and avoid unnecessary returns, book a free demo today. Our customers, such as Miele, Kalkhoff and fahrrad.de, are already fully convinced of this. Our experts will be happy to advise you!