woman on laptop with credit card

The Ecommerce Boom and Challenges with Returns

Package Returns Surged by 70% Last Year

Returns have always caused challenges for retailers. With ecommerce booming, stores have new return-related problems to solve. In 2020 the number of ecommerce packages returned climbed by 70% compared to 2019 levels.

Analysts expect that some of the online shopping habits formed during the pandemic will be here to stay. In fact, a recent survey showed that 42% of consumers say they will shop online even more than they do now once the pandemic subsides. Because of these trends, ecommerce companies large and small are working on permanent solutions to the challenges they have faced with returns.

Trends Driving Customer Behavior

About 30% of all online purchases are returned, which is roughly three times the return rate for items purchased in brick-and-mortar stores. Ecommerce purchases are returned more for a variety of reasons.

Sometimes items ordered online do not fit properly, or do not meet customer expectations for other reasons. Also, online shoppers often order multiple sizes or colors of items so they can see them physically with the intent to return what they do not want. It also tends to be easier for customers to simply put an item back in the mail than it is to go to a physical store and wait at the return counter.

Creative Solutions

Though online returns offer convenience for shoppers, they are a significant weight on retailers’ balance sheets because of shipping and processing costs. On average, every $1 million reduction in returns adds $500,000 to a retailer’s profits.

Many large retailers like Amazon (AMZN) and Walmart (WMT) have employed the strategy of just telling customers to keep unwanted items. Meanwhile, Ulta Beauty (ULTA) offers virtual makeup try-ons. The feature was rolled out in 2016, but its popularity surged during the pandemic. Similarly, Levi Strauss & Co (LEVI) built an online tool which allows shoppers to see how jeans and other items look from various angles on different body types.

Outside analytics companies are also helping retailers with their return strategies. For example, Newline is a software company which has developed what is called a KeepScore. This number measures how likely a customer is to return products. For customers who are habitual returners, companies might choose not to offer them special discounted prices on certain products. Companies across industries will be working in the coming months to create positive return experiences for customers while not letting these return procedures drain their balance sheets.

Things are changing daily within the financial world. Sign up for the SoFi Daily Newsletter to get the latest news updates in your inbox every weekday.

Sign up

Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Advisor
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.

All your finances.
All in one app.

SoFi QR code, Download now, scan this with your phone’s camera

All your finances.
All in one app.

App Store rating

SoFi iOS App, Download on the App Store SoFi Android App, Get it on Google Play

ABOUT SoFi SoFi helps people achieve financial independence to realize their ambitions. Our products for borrowing, saving, spending, investing, and protecting give our more than one million members fast access to tools to get their money right. SoFi membership comes with the key essentials for getting ahead, including career advisors and connection to a thriving community of like-minded, ambitious people. For more information, visit SoFi.com. Want an easy and convenient way to manage your financial life? Get the SoFi app. For iOS and Android.

TLS 1.2 Encrypted
Equal Housing Lender