Study: 32% of retailers rue manual return processes

As returns pile up, retailers are seeking solutions to help them manage all of the items coming back. While it’s paramount that returns continue to be treated as a customer-facing proposition, it’s possible that the answer lies at least in part in the retailer’s own operations.

Retailers have long struggled with returns, but the customer-friendly and flexible (read: free) policies of ecommerce are only making the issue more acute. The return rate spiked to 16.6% in 2021 as online shopping surged, according to the National Retail Federation. While the return rate was roughly flat in 2022, this still sustained the marked growth from pre-pandemic times.

There's new evidence that the numbers may be even higher. New results of a study from SML RFID that analyzed responses from 500 senior business leaders indicated that 30% of the items retailers sell are eventually returned.

Along with increasing use of the supply chain, this trend puts particular pressure on the bottom line. The survey found that 42% of returned items are sold at a discount, while 12% aren’t even resold.

For business leaders, it may be natural to think about solving returns as a matter of changing customer behavior. After all, shoppers initiate the returns, so introducing new ways to influence the decision to send an item back is a logical next step. That's why new ecommerce initiatives, such as charging for returns and encouraging exchanges, are designed to nudge shoppers in the right direction with carrots and sticks.

Improvement will also require making changes to the customer experience in the store. It's an area where retailers struggle, in part because of a lack of available staff. According to SML, 42% of retailers say they lack ample staff on the floor, while 30% agree that the staff they do have spend too much time on mundane tasks.

Further, internal processes are also outdated and slow. In all, 32% of retailers state they spend too much time manually processing returned items.

“When a product is returned, it goes through several stages of the reverse supply chain before it can be resold – taking weeks or even months before heading back to the shop floor from transport, cleaning, re-packaging, and re-stocking,” the report states. “The eventual resale price continues to drop as items spend more time away from the shop floor.”

In some ways, this is an old problem. Returns have been a feature of retail for a long time. With ecommerce practices that aim to make it easy for a customer to send back an item that they may not match the expectations they have, it doesn’t appear to be going anywhere, either.

So it's also worth remembering that change can come from within. Retail executives can look internally to examine how their own returns systems and workflows can become more efficient, especially in areas where they are still relying on manual processes. It’s a place where technology can play a role. Item-level RFID, which enables tracking of items throughout the supply chain, can be a particularly valuable tool, says SML. The study found that 21% of retailers said item-level RFID would help to improve their returns processes, which is above market penetration of 15%.

“By investing in Item-level RFID technology, retailers can have instant visibility and access to reverse supply chains, enabling them to streamline back-end operations and send items back to the shop floor much quicker,” said Dean Frew, CTO and SVP of RFID Solutions at SML. “It also significantly reduces time spent on manual inventory-related tasks enabling staff to aid customers and improve their experience. Investing in technology and processes that enable improved customer experience should be a top priority in an increasingly competitive landscape.”