Changing the Narrative: Transforming Product Returns into a Growth Opportunity

Article written and published by Brandon Rael - Rethink Retail leader

Product returns are a core part of the customer journey. The digital and physical shopping experience boundaries are a thing of the past. Customers are seamlessly navigating from discovery to consideration and the transaction process and have the product fulfilled in the most convenient way, including BOPIS, curbside pickup, and shipping to the home. The overall ecommerce sales were $1.1 trillion in 2023, an increase of 7.6% (+1.2%) from 2022's 14.7% of total sales, which directly translates to customers returning products at an unprecedented rate.

State of product returns – challenges and opportunities

Historically, retailers have always focused on mitigating product returns, considering them a challenge or issue. With total retail returns coming in at $743B in 2023 at an overall return rate of 14.5% and online return rates at 17.6%, or $247B, there is a significant opportunity for retailers to optimize and learn from the returns processes. However, the perception of returns as a complete loss is misguided.

Shifting the mindset can change the negative narrative of returns to present opportunities not only to decrease return rates but also to drive profitable and sustainable growth across many of the core retail operational areas.

Changing the narrative starts with the "why"

To provide a more seamless shopping experience, retailers have focused on improving the overall returns processes, including using QR codes, providing flexible shipping options, and, in most cases, at no cost to the customer. However, rather than just investing in capabilities to make the returns process more efficient and flexible, there is a unique opportunity to leverage AI capabilities to examine the root causes and customer feedback optimally. Incisiv completed a recent study that found that a staggering 73% of returns are classified as "controllable." Meaning that there are strategic and prescriptive approaches retailers can leverage to change the go-forward narrative.

As we witnessed at the latest NRF 2024 Big Show, AI capabilities are no longer in the hype cycle. They are embedded within many solution capabilities, including the retail product returns processes. Leveraging AI insights has quickly become intuitive and the industry standard to keep up with rapidly changing consumer behaviors. Additionally, a study commissioned by Microsoft and conducted by IDC shared that retailers average a return on investment of $3.45 for every $1 they invest in AI.