How to Eliminate Shrink Caused by Returns

Rhyanna Taylor's recent article in Loss Prevention magazine provides some valuable insights on how to reduce returns and keep your customers happy.

Loss Prevention Magazine, June 20, 2023

Allowing customers to return items for almost any reason is a sound retail business practice, but it comes at a cost. Although it’s good business to offer returns to customers, poorly managed processes lead to a significant loss of revenue, due to shrink around returns. The National Retail Federation stated that $816 billion worth of product was returned in 2022. But returns are controllable, like theft, breakage, and other categories of shrink. Not all returns are shopper driven, in fact, one study claims that 73 percent of returns occur due to a retailer-controllable action.

Current solutions to mitigate shrinkage associated with returns primarily focus on post-purchase measures, such as imposing fees, narrowing the return window, and re-commerce of returned merchandise. However, these measures do not provide long-term solutions. Attempting to reduce the cost of returns after a consumer has decided to return a purchased item proves to be a challenging, expensive, and ultimately ineffective approach.

Returns also have a significant environmental impact. Although there is confusion regarding specific ESG (environmental, social, and corporate governance) best practices, there is no question that returns leave an enormous carbon footprint. Retailers face significant pressure to reduce the 16 million metric tons of carbon dioxide emissions generated annually from transporting returns. Even the most efficient, ESG-focused reverse logistics operation can’t eliminate the billions of pounds of returned goods that end up in landfills.

Retailers can reduce returns by aiming at preventing returns in the first place. But how can this be achieved?

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