Returns Are the Final Frontier for E-Commerce Dominance

E-commerce has had to overcome several barriers in its relatively short lifespan. (Well, relatively short for a Baby Boomer. But not so much for Millennials and Gen-Zers, who don’t remember a time when milk was delivered to your doorstep daily.)

E-commerce has had to overcome several barriers in its relatively short lifespan. (Well, relatively short for a Baby Boomer. But not so much for Millennials and Gen-Zers, who don’t remember a time when milk was delivered to your doorstep daily — but you couldn’t get almost everything else delivered for free in two days.)

First, there was online penetration. In 1999, only 44% of Americans had Internet access, either at home or at work.

Next, there was the fear of using your credit card online (65% in 1999). Most people got over that as they began to trust traditional retailers’ online sites and Amazon became a household word.

Shipping costs are too high. Enter Amazon Prime and FREE SHIPPING on orders over $30 from other retailers.

“I want to see it and feel it” and “I need it today” resulted in shopping online and buying offline, a common practice for several product categories even today, including high-end electronics and clothing.

Returns are a hassle and/or expensive. Yep! About 33% of global shoppers cited online return policies and processes as deterrents. (Chain Store Age, October 2015)

If there’s one thing consumers hate more than paying for shipping, it’s paying for return shipping. As counterproductive as it seems, I go out of my way to take Amazon returns to a return center to avoid paying $7 for return shipping. Returning an online purchase to a retail location is another option that consumers will choose — one that is probably more time-intensive, with a higher negative ROI. I don’t have firsthand knowledge, but I’m sure most online retailers have tested a higher price point with free shipping vs. lower price point plus shipping. Chances are, free shipping wins.

Zappos offers free returns so you can try different sizes and colors of shoes on in the comfort of your own home. However, free returns are met with the same skepticism regarding price as free shipping.

E-commerce continues to grow at a decent pace.

“Early analysis from Internet Retailer shows online retail sales in the U.S. crossed $517 billion in 2018, a 15% jump, compared with 2017. The growth in retail sales in physical stores reached 3.7% last year. This means that e-commerce now accounts for 14.3% of total retail sales, when factoring out the sale of items not normally purchased online, such as fuel, automobiles, and sales in restaurants. And it also means that in only a decade, the web has more than doubled its share of retail sales. Ten short years ago, e-commerce was at 5.1% of total retail purchases.”

While an almost threefold growth in 10 years is impressive, I think that making the return process more satisfying for consumers can accelerate the growth of e-commerce. Changing the consumer mindset about return costs may be the answer.  In his book, “Misbehaving: The Making of Behavioral Economics,” Richard Thaler notes that members view their Costco and Amazon Prime annual fees as investments and make no attempt to allocate those costs over the various purchases they make during the year.

Is there an opportunity for an unlimited free returns membership add-on from Amazon or another retailer? I know people who are chronic returners at brick-and-mortar stores who would welcome it. Pricing it certainly would be tricky. What do you think?