Christopher Tang
Wall Street Journal reported that the 2015 holiday shopping season was a winner: E-commerce sales rose 20% year over year and total sales rose 7.9% (Ng and Stevens, 2015). However, approximately 25% of e-commerce sales are expected to be returned due to many reasons: unwanted gifts, after purchase regrets (wrong size / color), etc. To woo consumers to feel at ease to purchase online, many online retailers such as Amazon offer risk-free returns.
Most online retailers are not equipped to handle returns. Instead, returned goods are collected, sorted and resold by logistics companies (e.g., Optoro, Genco (a FedEx Corp. business) or B-Stock Solutions) and resold to liquidators such as Shorewood Liquidators at approximately 10-20 cents on the dollar. If 25% of items are returned and sold at 15 cents on the dollar, online retailers incurred a huge loss on those items they thought they sold.
What can online retailers to do reduce the Boomerang effect of these online sales returns?
First, develop virtual try on technology. To reduce returns due to after purchase regrets (wrong size / color), online retailers can develop virtual try on apps. For example, besides the 2-D virtual try on glasses developed by Warby Parker, Glasses.com developed award-winning 3D virtual try-on technology that enable shoppers to see how different frames will actually look on their faces. For apparel items, startup companies such as Embodee developed a 3-D virtual try-on technology by using measurements from shoppers input or from a 3D camera or scanner. This technology enables the shoppers to see how garments look and fit using color-coded “comfort maps” to pinpoint where garments will be tight or loose.
Second, to reduce returns due to unwanted gifts, encourage shoppers to develop an online gift registry that can be shared with friends. Also, create a platform that allows for “crowd gifting” so that multiple friends can share the cost of a more expensive gift. The logic is simple: no one would like to send a gift to a friend that is not wanted unless everyone is really into white elephant gift exchange parties.
Third, develop “before sales” customer service, not just focus on aftersales customer service. Zappos pioneered the customer service “consultants” who talk with potential customers like friends and helped them to select the shoes they want (and love). By doing so, it helped Zappos to boost sales and reduce returns.
To reduce returns, online retailers should develop “before sales” services instead of focusing on “after sales” services. To avoid the boomerang hits you on its return, throw it carefully!
Reference
Ng, S., and Stevens, L, “Unwanted Presents Piled Up,” Wall Street Journal, December 28, 2015.
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