Part II: The Hidden Costs of Online Returns

This article is part two of a three-part series covering the development and landscape of the online return cycle, the negative environmental and consumer impacts of the system, and how you can make smarter purchasing decisions to break the cycle.

Though retail returns have increased rapidly since the late 1990s, one of the many outcomes of the Covid-19 pandemic has been an even starker jump in the number of returns—particularly from online purchases. 

According to the National Retail Federation, consumer returns rose from about 10% to 16% overall between 2020 and 2021, and as much as 30% of all online purchases are returned. The cycle has reached a boiling point and the damage to the environment, consumers' wallets, and the economy must be addressed as rates continue to climb. 

The Environmental Cost

When considering the lifecycle of an online return, there are several steps to take into account once a consumer decides to return an item, including transportation, packaging, storage, and what to do with damaged items. The outcome of these steps has evolved into a system of waste and pollution that compounds each year.Part II: The Hidden Costs of Online Returns | ITC SHOP NOW

In the United States, return shipping creates over 33 billion pounds of carbon dioxide emissions annually—more than that of 3 million cars. Moreover, online shoppers assume their returned items are making it back on the shelf to be sold to someone else, yet an estimated 5 billion pounds of returned items end up in landfills instead. Many items, especially clothing and textiles, are often produced with cheaper materials like synthetic fibers meaning they could take over 200 years to break down, if at all.

For items that do make it past a retailer’s return inspection stage, damaged packaging and the need to open items for evaluation means many products require repackaging, yet only 54% of total packaging can be recycled. This leaves the other 46%—much of which is non-biodegradable plastic—to also be thrown in the landfill.     

The Consumer Cost

One result of the growth in online shopping has been the development of new retailer-shopper relationships. The expectation for fast, free, and easy shipping and returns has created a shift in the overall timeline and perception that customers bring to a purchase. Access to returns alters the initial commitment level for a customer—whereas purchases used to be viewed as permanent, they’re now viewed as temporary, or fluid. The decision to keep an item is no longer made in the store or at the time of purchase, but at some vague point in the future when a customer decides whether to keep an item or not. 

Impulse buying, traditionally viewed as a bad habit, is becoming a normal or even encouraged behavior. With the consumer mindset for making a purchase evolving from permanence to fluidity, newer generations of shoppers make purchases based on instant gratification with little thought for if the product will serve them in the long term or be the best fit for their needs—after all, they can always return it.

This new expectation harms consumers, retailers, and manufacturers. The cost of seemingly “free” returns is merely incorporated into the price of an item, and as return rates climb, so must prices. To stay competitive while also managing a vast influx of return services, retailers are forced to cut costs in other ways. The consequence is poorer quality products that don’t last, end up in landfills anyway, and need to be replaced more frequently.

The Economic Cost

The logistical challenges presented by the online return cycle were already unsustainable for the majority of retailers in a pre-pandemic system. That said, the massive increase in online shopping and subsequent demand for free and easy returns that became the norm throughout Covid-19 lockdowns is proving to hurt company profits for mid and small-sized companies that don’t have as robust of resources as online giants like Amazon, Zappos, and Target. 

Part II: The Hidden Costs of Online Returns | ITC SHOP NOW

The increased costs incurred by the retail giants that have promoted such lenient return policies are not absorbed, but rather passed down to the smaller retailers using their platforms. Often, these increases find their way into the listing price of the products themselves, meaning that smaller retailers and consumers continue to pay for the returns that are presented as “free.”

Returned items are difficult and costly to organize, demanding more staff to process them, more space to store items now delegated to “second-hand” status, extra shipping costs, and losses on fraudulent returns. In spite of efforts to save and resell items when possible, many products still go directly to the landfill. 

Most companies simply don’t have the staff, resources, or budget to maintain the return cycle. Even the huge online retailers that have created this system are struggling to keep up with the massive influx of consumer returns. To stay afloat, retailers are continually forced to lower the quality of product by using cheaper materials and labor and building extra costs into the price for consumers, which harms both shoppers and retailers.  

What Now?

The system may be unsustainable, but experts don’t expect consumers to accept a re-emergence of stricter policies regarding online returns. Consumer-friendly return policies are a major incentive for shoppers; Research from the Journal of Marketing found that customers required to pay for return shipping decreased their spending on future visits by 75-100% whereas consumers who received free return shipping increased their spending by 158-475% on subsequent transactions.  

Environmentally conscious online retailers are shifting their focus to providing a valuable consumer experience in the pre-sale phase with the use of new technology and comprehensive customer service. Implementing online chat features and in-depth product details with better images, descriptions, and videos helps online retailers reduce return rates, but shoppers should do their part, too. A little research can go a long way when it comes to finding a high-quality product that exceeds your expectations and stands the test of time.

The next installment of this series explores what to look out for to avoid low-quality products and planned obsolescence. Learn how to make a satisfying purchase, judge if a product is made-to-last, and reduce costs on the environment and your wallet. 

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