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Retailers Weigh Ecommerce Return Policy Strategies

Turning to AI for Guidance

Spurred by higher rates of online shopping and a push for improved customer experiences, more retailers are adopting return procedures based on those of Amazon (AMZN). The tech giant has a system which allows artificial intelligence to decide if a customer should keep or return an item.

A spokesperson from Walmart (WMT) said this type of system looks at a customer’s purchase history, the item’s value, the cost of processing the return, and whether or not the merchandise can be resold. Processing each online return can cost between $10 and $20. That excludes the cost of shipping, which drives the price of online returns much higher—especially for large, heavy items.

In the past retailers have preferred to send shoppers to stores to process returns. Returns were cheaper that way, and shoppers often made more purchases when they returned items in-store. Many customers have been reluctant to enter a store and process a return during the pandemic, so retailers bulked up their online capabilities.

A Flood of Post-Holiday Online Returns

More people than ever before have been making everyday purchases online rather than in physical stores since the start of COVID-19. Narvar, a third-party return processor, said that 70% more ecommerce items were returned in 2020 than in 2019. After a busy holiday season of online shopping and shipping, delivery companies and distributors are bracing for record returns. Researchers expect returns from the holiday season to total $70.5 billion—a 73% jump from the average over the last five years.

While FedEx (FDX) agreed with other deliverers that return volumes are at record highs, the company said the ratio of items-returned to items-delivered is actually lower than normal. Essential goods have made up a more significant portion of ecommerce sales and deliveries during the pandemic, and toilet paper is less likely to be returned than a necklace or ill-fitting sweater.

Cybercriminals Take Advantage of New Return Policies

Some ecommerce companies are implementing new “keep it” policies. But according to analysts at cybersecurity company Sixgill, fraudsters will claim an item never arrived or failed to work properly. Sometimes, in a bid to secure a refund, people say they are unable to sign for packages because they are afraid of catching COVID.

Despite the fraud, Narvar’s chief executive expects more “keep it” policies to emerge in the next few months. Brands want to compete with Amazon and give customers positive experiences, and sometimes the cost of processing an online return is not worth it for retailers.

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