How to Reduce Holiday Return Costs for your eCommerce Store
December 19, 2022
by Rebecca Fox

It’s that time of year again when eCommerce stores see a surge in sales and an influx of returns. While returns are inevitable during the holiday season, there are ways to reduce the cost of holiday returns for your store. 

Follow these tips to keep your return rates and return costs low, and maximize your profits from the holiday season.

What’s the True Cost of Holiday Returns?

Factoring in transportation, processing, and other costs, holiday returns cost online stores anywhere from 17-66% of the price of the original item. 

Regardless of whether the returned item is in good condition, the entire return process can still be expensive due to labor, transport, and inspection costs, as well as the environmental impact of returns.

Because of the high cost of returns, it’s essential to know how to reduce your holiday return rates and properly handle product returns in order to increase your profits this holiday season.

Reverse Logistics Costs

Reverse logistics costs include shipping, labor, processing, and restocking costs. Expect reverse logistics costs to rise during the holiday season as a result of increased sales and returns.

The influx of returns can slow down distribution centers during the peak holiday season. During the holiday season, the focus is more on delivering outbound products, so accepting returns can slow down operations.

Finding ways to make shipping, warehousing, and processing returns more efficient is essential for reducing your return costs. 

Loss of Customers

If it’s a pain to return products, customers are likely to stay away from buying holiday gifts from your store in the future. In fact, 84% of customers would stop buying from an online store after a negative return experience.

Losing customers comes at a great cost to your store, as it is more expensive to acquire new customers than to retain existing ones.

The lost lifetime customer value (LTV) and the expense of winning back customers or acquiring new ones add up to a significant cost in both revenue and reputation.

Damaged Reputation

Returns can have a negative impact on your store’s reputation if not handled properly. If someone receives a holiday gift and can’t easily return it, they are unlikely to recommend your store to their friends and family.

Each customer you lose can have a ripple effect, costing you further business down the line, as negative reviews can prevent future customers from completing their purchases.

If your reputation is damaged, you could lose potential customers and referrals, which can have a long-term negative impact on your business.

Environmental Cost

While nearly half of customers and gift recipients will return unwanted gifts in the weeks after the holidays, what many holiday shoppers may not know is that shipping back returned products contributes to carbon emissions, and each year, billions of pounds of returned products end up in landfills. Returns have a huge environmental cost unless handled wisely.

Online returns typically result in more emissions and waste than returns made to brick-and-mortar stores, due to the extended transportation process required. 

When customers return items bought online, they often have to ship them back to the retailer or drop them off at a designated location, after which the product is shipped to a warehouse and then very often to a landfill. 

Tips to Reduce Your Holiday Return Costs

This holiday season, reduce your holiday return costs by following these tips.

Offer “Just Keep It” Returns

Give customers the option of keeping items instead of shipping them back with a returnless return. By eliminating the shipping, processing, handling, and restocking of returned products, your store can save on reverse logistics costs and reduce the environmental impact of returns.

The “just keep it” option is great for products you can’t resell and is based on customers’ purchase history, the value of the products, and the cost of processing the returned products.

It often makes sense to let customers keep lower-priced items as processing the return of these items often isn’t worth it. Products that are difficult or unhygienic to repackage are also often eligible for a returnless return.

Returnless returns during the holidays are already implemented by many leading eCommerce stores such as Amazon, Walmart, and Target.

Give the Option to Buy Online, Return In-Store (BORIS)

Providing customers with the option to return online purchases to brick-and-mortar stores can reduce transportation, labor, and processing costs. 

More than half of customers plan to do their holiday shopping online. Customers are more likely to shop online if they can return an item in-store. If they’re buying a gift, they’ll want their gift recipient to have the choice of how they can return the gift if they don’t like it.

Offer the option to buy online and return in-store to create a seamless shopping experience and increase customer satisfaction, while reducing your return handling costs. 

Reduce Return Rates

Reducing your return rates minimizes the costs associated with returns. Reduce your holiday return rates by optimizing your eCommerce store to ensure customers have as much information as possible up-front and optimizing your workflows to reduce the likelihood of returns after the holidays.

  • Create a Special Holiday Return Policy

It’s important to have a well-thought-out holiday return policy in place, as 44% of customers say that return policies influence what holiday gifts they purchase. 

When creating your holiday return policy, take into account that some customers may be purchasing gifts well in advance of Christmas, and a return policy with a 30-day return window may not be sufficient. 

Consider making your holiday return policy more lenient, with a 60- or 90-day return period, so gift recipients have plenty of time to return items.

Display your holiday return policy clearly on your website and make sure to highlight any special rules in place for the holidays. 

  • Optimize Your Delivery Times

Every year, overwhelmed supply chains, unexpected weather events, and understaffed delivery drivers lead to millions of packages not arriving in time for Christmas. This is a problem, as no one wants to receive their Christmas gifts in January.

Reduce post-holiday returns by guaranteeing on-time delivery. Make sure you check your shipping carrier’s cut-off dates and update the holiday shipping cut-off dates on your product pages. 

  •  Learn from Last Year’s Holiday Returns

To reduce post-holiday returns, collect holiday return data from past years and determine what you can learn from it. 

Look at data such as: 

  • How many items were returned? 
  • What were the most common reasons for returns? 
  • Which items were most often returned?

With in-depth return data and customer feedback, you’ll have the information needed to implement new workflows, forms of communication, and ways to ensure product integrity. All of these can help you reduce the number of holiday returns this year.

Automate Returns Management

An automated returns management system like ReturnGO can reduce your holiday return costs by automating the return process from start to finish. This saves you time and money by reducing the need for manual processing, and improves customer satisfaction by providing an efficient returns process. 

Automating your return process during high-volume seasons like the holidays can free up your team to focus on other tasks such as fulfillment and customer service inquiries, which often peak during the holiday shopping season.

Reduce return rates, encourage repeat business, bring down costs, and improve your store’s reputation by automating your returns process.

Optimize Your Reverse Logistics

Reverse logistics during the holiday season can be tough for even large, well-established eCommerce stores because with returns come increased shipping costs, disruptions in warehouse operations, and questions about what to do with returned products.

Having efficient reverse logistics processes in place before the holiday return rush is essential for reducing return costs and environmental damage.

A great way to optimize your reverse logistics processes is by using a third-party logistics provider (3PL). 3PLs handle inventory management, return shipping, and returned product processing, which can save you time and money compared to managing these tasks yourself or using multiple different providers.

Using a 3PL for reverse logistics is becoming an increasingly popular choice for eCommerce stores – 40% of retailers use a 3PL to handle returns.

Integrating your 3PL with your returns management system gives you a complete and efficient solution for handling the reverse logistics process during the busy holiday season.

Reduce Your Return Costs This Holiday Season

Make sure your store is ready for the holiday return rush. Provide cost-effective return methods and optimize your returns process to reduce the costs of holiday returns, maximize your profits, and start off the New Year ahead of the game.

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