The 2023 State of Returns

2023 has already proven to be a different ball game for the merchant-consumer relationship. Today, economic factors are driving buyers to shop around for the best deals, and forcing sellers to take stock of their business costs. 

When consumers become more price conscious, competition for their attention increases, making it critical for merchants to provide a phenomenal buying experience from start to finish.

And that experience doesn’t stop at checkout – in fact, merchants can positively influence the customer experience post-checkout, even if the consumer changes their mind about their purchase. 

Returns have been a highly-contested topic among ecommerce merchants, and are often seen as a cost center. However, a strategic approach to returns can yield major gains in customer retention and inventory management.

I’ll dive into research that highlights the power behind returns, and discuss how merchants can implement strategies that align with the findings to promote business growth and efficiency. 

People are Returning More, Earlier

ShipStation is constantly analyzing the latest returns trends to understand consumers’ habits and preferences, alongside merchants’ pain points. Let’s start with the performance of the most recent, high-volume returns season, November 2022 through January 2023. 

ShipStation’s main takeaway? Consumers returned more, earlier in the most recent peak “returns season.” Based on data from ShipStation merchants, the returns rate increased 20% YoY between December 1, 2022 and January 15, 2023 (the number of returns compared to total purchases).

More holiday returns happened before Christmas than after Christmas, with 53% of holiday returns made from December 1 – December 24 2022. Interestingly, the most popular day to make returns was on November 28, 2022 (Cyber Monday). In comparison, the most popular date to return during the 2020 holiday season was Jan. 4, 2021.

So, what made this year different? There are a few theories.

First, in peak pandemic times, inventory scarcity was a concern among consumers. Many consumers had a tendency to hold on to items, even if they were repeat or not immediately-necessary purchases. As inventory levels steadied in 2022 and 2023, so did consumers’ sentiment toward stockpiling. Now, consumers have likely reverted to pre-pandemic returns behaviors.

Second, over the last three years, consumers have increasingly opted to shop online vs. in-store. Now, many consumers tend to purposely over-purchase online (i.e., purchase multiple sizes, colors, or variations of the same or similar products) due to limited product guidelines online, knowing they can return what they don’t want.

The early nature of returns aligns with retailers’ latest promotional strategies. Merchants began promotions earlier, as early as summertime, in an attempt to alleviate rising inventory. The fact that the greatest number of returns were made by Cyber Monday in the 2022 holiday season could mean that seasonal shopping will continue to creep up earlier and earlier. 

The Majority of Consumers Want Free Returns

In addition to merchant performance data, ShipStation also conducted a 2023 study on consumers’ latest expectations for returns, alongside merchants’ 2023 returns plans. The findings revealed that neither merchants nor customers want to deal with or pay for returns this year.

As online shopping continues to become more seamless and affordable, ShipStation’s data found that consumers now expect the same experience with their returns processes – and widely see returns as the merchant’s responsibility.

ShipStation found that 44% of shoppers are less likely to shop with a brand that has a cumbersome or difficult returns process. In fact, 81% of consumers now expect retailers to offer returns for free.

Interestingly, younger, or Gen-Z shoppers (ages 18–24) are the most willing age group to pay for returns. While the next age group up, the Millennials (25–34-year-olds), expect free returns at the highest rate.

Returns can be costly and, as a result, ShipStation found that 66% of merchants don’t offer free returns. In fact, 22% of surveyed merchants don’t offer any form of returns, and in 2022, ShipStation found that 18% of merchants planned on restricting their existing return policies or eliminating free returns to cut unnecessary costs. 

The one aspect where consumers and merchants align is on how to process returns. ShipStation found that consumers are more than willing to drop a return shipment off with a carrier, should the return label be provided in the box. Meanwhile, 37% of merchants prefer customers to print the return label at home and drop the package off with the carrier.

Merchants: Use 2023 to Optimize Your Returns Strategy 

Returns are a focal point of the online shopping experience, and a streamlined, customer-centric approach to returns will help online merchants retain and gain new customers amid a turbulent 2023. A customer-centric approach to returns could look like:

• Lengthening returns windows to cater to longer shopping seasons
• Investing in detailed sizing and product guides to help consumers make the correct purchases in the first place
• Adopting technology to streamline returns quality assurance in the warehouse and speed up refunds
• Increasing customer communications around returns, as ShipStation data found that 42% of consumers want order tracking updates daily, whether or not the status has changed. 
• Providing a return label in the original parcel  

The last point is, understandably, a hefty ask. However, it’s worth considering as a business investment and marketing strategy.

For merchants who choose not to offer free returns upfront, consider a threshold pricing strategy (i.e., allowing customers to unlock free returns if they place an order above a certain dollar amount). For those customers that don’t have a printer, consider allowing them to print at a carrier facility, and then adding the postage amount to their refund.

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