For Part 2 of our New Yorker series, let’s discuss returns as they are today. Returns have become a significant economic phenomenon in the United States. Annually, returns amount to $1 trillion in the country, a figure that rivals the GDP of many nations globally. The scale of this issue is further underlined by the fact that 1.5% of the entire U.S. GDP is comprised of returned goods.
The rise of online shopping has led to a 8-10% surge in returns and this shift in consumer behavior is exemplified by the fact roughly 20% of online purchases are returned. However, the sector most affected by returns is online apparel, where a staggering 40% of purchases are frequently returned.
Returns have been deemed “inherently entrepreneurial” by Fara Alexander, director of brand marketing at goTRG, a returns-management company based in Miami. However, this approach can backfire if it leaves customers unsatisfied. Nikkos Papaioannou, from Amazon Electronics, said “if the seal has been broken, if the wrap is not intact, then it’s not going back to the shelf.” In terms of shoes, he said that to Amazon, “the moment the box opens, you’ve lost the opportunity” to put them back on the shelf.
Easy returns have become a pivotal factor in consumers’ shopping decisions, and can be make or break in a customer’s decision to shop at a store. Many online returns now involve a simple QR code, eliminating the need for repackaging. Spencer Kieboom, a former major-league baseball player, has found a niche in the returns market. His company, Pollen Returns, utilizes underemployed rideshare and delivery drivers to pick up unwanted items at buyers’ homes, offering a hassle-free solution. In some cases, businesses dealing with bulky and heavy items like sofa beds and dining tables often choose not to require returns due to the exorbitant cost of return freight.
Dale Rogers, a business professor at the University of Arizona, said that “There are people who think that open returns are an idea whose time has come and gone, but it’s a hallmark of successful American retail. If you make it easy to shop, and you reduce the risk to the consumer, what you get is a lifetime consumer.”
The COVID-19 pandemic accelerated the growth of online shopping and, consequently, returns, by several years. As lockdowns altered shopping habits, remote workers invested in home office equipment like desks, chairs, and computers.
John Hogan of America’s Remanufacturing Company posed a question to a group of M.B.A graduates at a Georgia Tech forum. He told them that he’d offer them the same computer as the one they have now at the same price, but twice as durable, twice the battery life and half the weight. He asked if anyone would want it; everyone raised their hands. Then, he asked who would want it if returns were not allowed. Every single hand went down. In his words, “you can’t beat the information you get from a product once a customer has touched it.”
Yours truly,
The Instant Refund Expert™
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