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Will the boomerang effect prompt e-tailers to rethink returns?

Spare a thought for postmen and women at Christmas just gone. According to research from business operations consultancy LCP Consulting, there will be approximately 30 million unwanted presents returned from the Christmas period in the UK. That equates to almost £600m ($908m) worth of goods, says the company. While retail analysts like IMRG and Mintel trumpet the increase in online sales for 2014 again, what does this really mean to online retailers? Is Christmas really as successful as everyone is making it out to be or are we looking at an artificial inflation of Christmas sales success?

The LCP Consulting figures certainly take the gloss off of the headline sales numbers that have been widely quoted for Black Friday, Cyber Monday and Christmas generally. But statistics can have a habit of playing seasonal games, seeing things through too much port and cheese perhaps. So are we in a festive bubble that’s about to burst before the online January sales get going?

In January this year Credit Suisse claimed that 40% of clothing and 5-10% of electrical goods purchased as Christmas presents in December 2013 would be returned to retailers. Statistics on exactly how much online retailers earn over Christmas, taking into account returns and exchanges are hard to come by but IMRG’s head of e-logistics Andrew Starkey says that about 20-22% of online orders (parcels, not goods) a year are returned. Given that the volume of parcels in November and December is expected to be around 230 million from online stores, the 30 million returns could as Starkey suggests, “be understating it a bit”.

Despite this, Starkey adds that there has definitely been a change in shopping habits as a result of previous experiences.

“More and more consumers are looking at delivery and return services before they make a purchase,” says Starkey. “What consumers don’t want is extras bolted onto a purchase. They want free returns if possible.”

As expected returns policies from online vendors vary widely with some of the larger, more established outlets offering free pick-ups and deliveries via companies such as Hermes or DPD. One smaller online retailer that sticks in the mind is Bath-based Lovehoney for its returns policy – not because it’s a sex toy e-tailer but because it offers a 365-day return guarantee. Most e-tailers will offer a 12 to 30-day cooling-off period but Lovehoney sees its policy as a differentiator, doing everything it can to give consumers purchasing confidence.

It’s unusual and surprisingly it’s not abused, according to the company at least. So should smaller online retailers be offering free returns and deliveries, at least for peak periods such as Christmas?

According to Stuart Higgins, retail partner at LCP Consulting, “Retailers face a critical choice about where they should focus their investments to ensure success.” And he is right, so should more be done on improving deliveries and returns?

Higgins adds that retailers “may attract customers by managing the front end, particularly during the critical Christmas period - but that is only half the story. How likely will they be to return when the experience doesn’t match the promise?”

That experience is as much to do with post-sales services as ease of use of the online shop. Solving the shopping cart abandonment issue, where shoppers put items in cart but don’t end up buying them, currently stands at 68% according to researcher the Baymard Institute. This is of course tied up with the problem. The cost of the extras, as Starkey points out, is an inhibitor and one of the key reasons for high shopping cart abandonment.

So what should online retailers do to improve things and maximise the rewards of seasonal shopping? Is it something as simple as free delivery and returns and is the cost worth taking on the chin?

Starkey adds that the default delivery and returns option for most small retailers is the Post Office. Adding free delivery, however, could boost sales. According to a UPS survey earlier this year, 58% of the 5,849 consumers it surveyed said that they would add extra items to the basket to qualify for free delivery.

It makes sense. With all the investment in technology to make the shop more navigable and easy on the eye, e-tailers have to play psychologist and see service through the eye of the consumer. While the returns in December and January may indeed knock the shine off the increased sales, the bottom line is that this is still an evolving industry.

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Marc Ambasna-Jones

Marc Ambasna-Jones is a UK-based freelance writer and media consultant and has been writing about business and technology since 1989.

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