What's Your Problem?
Is the Era of Free Returns Over?
Aug 24, 2023
Amit Sharma, the founder and CEO of Narvar, discusses the challenges of offering free returns and whether retailers can afford them. They explore the evolution of online returns, the value proposition of companies, and the future of returns in a changing economic landscape. They argue for a more transparent conversation about return costs and propose that customers should bear the cost to create a fairer system. The chapter also shares valuable insights from their experiences at Apple and Walmart.
24:14
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Quick takeaways
- Returns account for around 25-26% of retailers' gross revenue, posing a financial burden on e-commerce retailers.
- Retailers are considering making returns more sustainable and cost-effective by charging return fees or implementing more stringent return processes.
Deep dives
The Cost of Returns: The Problem for E-commerce Retailers
Returns are a significant challenge for e-commerce retailers due to the high costs associated with processing and dealing with returned items. Approximately 10% of online purchases are returned, with this rate even higher for certain categories like shoes. This poses a financial burden on retailers as returns account for around 25-26% of their gross revenue. Free returns, which have become the norm in the industry, are not actually free, as there are costs involved in shipping, inspecting, grading, and reselling returned items. Companies are now considering how to make returns more sustainable and cost-effective, some by charging return fees or making the return process more arduous for customers.
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