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Research project

Buy online, return in store - no such thing as a free return

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Project overview

This study finds that returns from online sales, particularly returns to store, are seriously impacting company profits.  A comprehensive investigation involved a desk study of 100 retailers’ online returns policies; a review of other existing studies; four in-depth case studies with major UK retailers, including over 25 interviews, observations and site visits; and another 17 structured interviews in the UK and Europe.’

Buy Online, Return in Store’ creates unexpected additional costs.  For example, businesses have to find more physical space to store returns in their shops and use store staff to process returns. It has also been difficult for firms to integrate and develop underlying IT systems quickly enough to cope with the demands of online shopping and returns.  Many businesses have complex procedures for managing returns. With little senior management oversight of the returns process, retailers find it difficult to pin down crucial information such as the rate of return and the costs of handling a returned item.

However, just a small reduction in the rates of returns and the additional costs can directly improve profitability. For an average company, the researchers estimate that a five percent improvement in the rate of returns has the potential to deliver real improvements (200 basis points) in net margin. Such improvements could be critical to help them deliver the services which customers expect (such as free delivery and returns) whilst keeping prices competitive.
Recommendations to improve the management of returns and increase profits from online sales include:·       Have a strategic plan to treat returns as a profit centre;·       Understand the true costs of returns and the potential opportunities to reduce these costs;·       Develop lean management thinking in returns to realise an effective omnichannel organisation;·       Manage the growing impact of returns to the business by simplifying and integrating IT systems;·       Make communications with customers and employees smarter as an inexpensive initiative that reduces costs of returns and increases income from secondary sales;·       Participate in the circular economy to create net benefits in terms of cash, corporate social responsibility and brand reputation.Notice: This report is the result of academic research into the impact of returns on online sales. It’s written for retail businesses to help improve their service to shoppers. If you’re a shopper and / or researching product returns with the shopper in mind, and want to know more about shopper rights, please click here to read our blog, a Responsible Shopper’s Guide to Exchanges and Returns.

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Research outputs