In e-commerce, returns are an important factor for the success or failure of your business. With the rise of online shopping expected to grow by 9% in 2024, returns have become a major concern for retailers.

High return rates have a negative impact on profits and cause plenty of operational struggles. To solve this problem, businesses must understand why customers return products.

In this article, you’ll read about the impact of returns on businesses and the most common reasons for e-commerce returns. Here's a quick overview of what you’ll learn:

1. The impact of e-commerce returns on business
2. Reason #1: Product quality issues
3. Reason #2: Size/fit issues
4. Reason #3: Buyer's remorse
5. Reason #4: Delivery issues
6. Reason #5: Better price found elsewhere

Let’s dive straight into the topic!

The impact of e-commerce returns on businesses

Returns have a huge impact on e-commerce as they influence both the financial and operational aspects of a business.

Financially, they reduce profit margins due to restocking and shipping costs. Operationally, they require extra resources for handling and processing. Here are some key stats on the impact of returns:

• Returns cost retailers $761 billion globally (source: Appriss Retail, 2023).
• In the US alone, returns account for over $816 billion in lost sales annually (source: National Retail Federation, 2023).
• US holiday shopping alone had a return rate of 15.4% in 2023. (source: National Retail Federation).
• 65% of customers would shop less with a retailer after a poor return experience (source: Forbes).

Having this context in mind, let’s explore the most common reasons for returns in e-commerce.

Reason #1: Product quality issues

According to a 2023 survey by Narvar, 25% of shoppers return items due to product quality issues. These issues can manifest in various ways, such as:

• defects in the material
• functionality problems
• products that do not meet the advertised standards

Additionally, discrepancies between the actual product and the expectations set by the description or images can lead to returns too. This is something that often happens to me, especially when I buy clothes online.

Moreover, some shoppers return items because they think the products won't last long, making them feel their purchase isn't worth the money.

All these factors combined create a scenario where product quality issues become a primary driver for returns, impacting both customer experience and retailer reputation.

Reason #2: Size/fit issues

The same survey found that 24% of shoppers return items because they received an incorrect size or fit. This issue arises from several factors:

• First, variations in sizing standards across different brands can lead to confusion and mismatched expectations.
• Second, the lack of standardized measurements and inconsistent labeling can make it difficult for customers to choose the right size.
• Third, online shopping does not allow try-on experience which makes it challenging for customers to pick the right size.

Finally, differences in body types and personal preferences further complicate the selection process, leading to an increased likelihood of returns and subsequent customer dissatisfaction.

Reason #3: Buyer's remorse

Another top reason for e-commerce returns is buyer's remorse or simply a change of mind. According to a 2023 report by the National Retail Federation, 30% of online shoppers cited "changed mind" as their reason for returning items.

This phenomenon occurs when customers second-guess their purchase decisions after the fact. There might be various factors that drive this behavior:

• impulsive buying
• financial reconsiderations
• emotional responses

Additionally, the vast array of choices available online and constant exposure to new products can lead to a sense of regret. This desire for something different can often push customers to return their initial purchases.

The challenge for retailers lies in the unpredictable nature of these returns, as they stem from the customers' internal decision-making processes rather than any defect or shortcoming in the product or service.

Reason #4: Shipping and delivery issues

Logistics is a crucial aspect of e-commerce, and any issues with shipping and delivery processes can lead to returns. Some common problems include:

• delayed or missed deliveries
• damaged packages
• incorrect items shipped
• missing components or parts.

The reasons behind this could be inefficient logistics and scheduling, poor handling during transit, errors in order processing, or inadequate quality control.

These issues cause significant inconvenience for customers, leading them to return the items. Such problems also impact the retailer's reputation and can result in negative reviews and reduced customer satisfaction.

Reason #5: Better price found elsewhere

Price sensitivity significantly influences customer behavior. According to a 2023 survey by Deloitte, 70% of consumers reported that price is the primary factor in their purchasing decisions.

A notable reason for returns is that customers often find a better price for the same or similar item elsewhere. This situation can arise due to several factors:

• Price comparison tools: With the advent of price comparison websites and apps, it has become easier for consumers to find better deals.
• Dynamic Pricing: Retailers sometimes adjust prices based on demand, leading to frequent price fluctuations. Customers might feel compelled to return a product if they notice a price drop shortly after their purchase.
• Customer savvy: Modern consumers are becoming increasingly adept at hunting for the best deals, leveraging loyalty programs, cashback offers, and discount codes.

This trend presents a significant challenge for retailers, as even a minor price difference can prompt returns.

Key takeaways

Understanding the root causes of returns is crucial for e-commerce businesses to develop strategies and processes to minimize them.

E-commerce returns happen mainly because of product quality or size/fit issues, buyer's remorse, shipping problems, and price sensitivity. These factors significantly affect customer experience and retailer reputation.

By paying close attention to return trends, retailers can pinpoint common issues with products or services, address customer concerns more effectively, and improve overall satisfaction. This proactive approach not only helps in reducing return rates but also fosters customer loyalty and trust in the brand.

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