Product Returns Represent Billion-Dollar Strategic Blind Spot for Major Retailers

“Product returns have never, to our knowledge, been explicitly included as a stage in a major customer journey model,” the authors note in their paper. “This exclusion represents a strategic blind-spot for marketers.”

In December 2020, Linne Fulcher, vice president, customer strategy, science and journeys at Walmart U.S., published a blog post that outlined Walmart’s new return policy. Dubbed “Carrier Pickup by FedEx,” the service was just in time for the holidays, free, and “here to stay,” Fulcher wrote. She described the policy as “an incredibly convenient way to make that unwanted gift ‘magically’ disappear,” whether customers bought items in a store, online, or from a third party vendor. “We want the returns experience to be easy, safe and seamless,” she added.

Returns are big business. According to the National Retail Federation (NRF), U.S. consumers returned an estimated $428 billion worth of merchandise last year—approximately 10.6 percent of total U.S. retail sales. The numbers for ecommerce are even more startling: online shopping accounted for roughly $565 billion of 2020 retail sales, of which $102 billion in merchandise—about 18 percent—was returned. However, retail advisory firm Optoro noted in 2019 that of 117 top retailers, not even a third of them quantify the full cost of returns.

Even before the pandemic hit, Sandy Jap, Sarah Beth Brown professor in marketing, Ryan Hamilton, associate professor of marketing, and former Goizueta Business School dean, Tom Robertson, were perplexed at how little academic research existed regarding returns. “Instead of viewing returns as a nuisance and an added cost, they are an opportunity to engage with customers and build brand loyalty,” explains Robertson. “Returns are part and parcel of the new retail landscape. This has been exacerbated by the strong uptick in online.”

To help retailers identify opportunities, Jap, Hamilton, and Robertson wrote “Many (Un)happy Returns? The Changing Nature of Retail Product Returns and Future Research Directions,” published in Journal of Retailing last year. The article is essentially a researcher’s road map for exploring this “strategically important area,” says Jap.

Some retailers, such as Warby Parker and Stitch Fix, have built returns into their business models. Others, like Zappos and Nordstrom, have made consumer-generated returns easy, assuming that doing so engenders brand loyalty and repeat business. Yet most retailers seem “to lack a coherent philosophy” on returns and “appear not to have built return rates into their business models at all,” the trio state in their paper.

“There are so many interesting and important questions to be answered around product returns,” says Hamilton. “Important as returns are, the academic marketing research has barely scratched the surface.”

“Many (Un)happy Returns” highlights five specific areas where advancements in theory and practice would provide opportunity for greater understanding:

1. How product returns transform the customer journey

2. The “dark side” of returns—exploring the gray area between justified returns and outright fraud

3. The effects of returns on traditional retailer supply chains

4. Customer response to easy product returns and practices

5. The effect of retailers’ product return practices on their reputation

“These questions represent a range of important directions for assembling a body of work on retailer-initiated and customer-initiated return behaviors and processes,” they write. “Ultimately, these might serve to improve the performance of return forecasting models, illuminate optimal go-to-market strategies and distribution processes in the evolving, technology-oriented marketplace that characterizes retailing today.”

Each of the five points above are detailed in a piece recently published by Emory University. That article is attached here:

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Ryan Hamilton, associate professor of marketing at Emory’s Goizueta Business School.

Sandy Jap holds the Sarah Beth Brown Endowed Professorship of Marketing Chair at Emory’s Goizueta Business School.

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