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The emergence of online commerce has given shoppers the benefits of anytime-anywhere shopping and doorstep delivery. In a race to outperform the competition and increase the customer’s lifetime value, retailers are raining discounts and offering incentives like hassle free-returns.

cost of returns

Photo credit: WSJ

Returns Come at a Cost to Retailers

However, free returns are cutting into margins of already struggling retailers.  Clear Returns estimates that the cost of returns for UK retailers £60bn a year, £20bn from items bought online.  Even top retailers are grappling with the cost of returns. Amazon spent $6.6bn on delivery in 2014, yet only received $3.1bn in shipping fees.  

Retailers are facing a major challenge.  Consumers expect free returns. Inconvenient returns deter 80% of shoppers according to a ComScore study.  However, retailers are struggling to offer this because they can’t absorb the cost into their bottom line.

 

Mitigating the Cost of Returns 

Retailers are investing in strategies to improve reverse supply chains to help mitigate the costs of returns. For instance, brick-and-mortar retailers with online shops are now offering in-store returns. 62% of shoppers are more likely to shop online if they can return an product in-store.  This policy not only reduces shipping and handling return costs for retailers but also drives the shopper to the store.  Once inside, shoppers can be enticed to make additional purchases.  

Cost of returns

Photo credit: Summer Classics

According to Invesp, 22% of returns are because consumers receive a product that looks different than expected. Online shoppers can’t look, feel, and try products as if they were in the store. There is a lot of guesswork for consumers when shopping online, and retailers are the ones who pay.  After all, 30% of all products ordered online are returned, compared to 8.89% in brick-and-mortar stores.  

There are strategies earlier in the buyer’s journey to reduce returns and to remove post-delivery surprises:

  • Invest in better product visuals
  • Provide better product information
  • Offer reviews and product comparisons

These strategies still often fall short, which is why retailers are turning to new technology like augmented reality (AR) to bring the in-store shopping experience home.  

Leveraging AR to Reduce Returns

Shoppers regularly express the absence of ‘try-on’ and ‘touch and feel’ as the major reason they don’t convert online.  Even with all the perks and benefits of online shopping, it has a far lower conversion rate than shopping at physical stores. And the cost of returns are debilitating retailers.  

With AR, consumers can virtually try products at home before buying. Augmented reality helps mitigate challenges of online shopping by bringing the in-store experience to eCommerce.  With an AR-enabled app like Augment, you can empower customers to see how products look in their homes.  They can try different colors and finishes and compare products side-by-side in life-like 3D AR.  

cost of returns

Photo Credit: Digital Trends

This application of AR applies to many industries such as fashion, home decor, furnishings, and electronics. We have seen industry leaders embrace this technology. In 2016, Wayfair launch its augmented-reality app, WayfairView. The app allows users place full-scale 3-D virtual models of furniture in their homes. Consumers can quickly see get a sense of look and size of products as if they were in the store. AR removes the guesswork and facilitates the path to purchase.

Augmented Reality eliminates the major bottleneck that customers face when shopping online, which eventually results in returns. By refining the earlier stages of buyer’s shopping journey, you will have customers who are less likely to return your products, resulting in lower costs.