The coronavirus pandemic has changed the way a lot of consumers do their shopping. While digital sales were picking up before the health crisis arose, they soared during the pandemic as customers opted to stay out of shopping centers and malls and instead make purchases from the comfort and safety of home.
But that trend hasn't necessarily worked to retailers' benefit. The reason? This new way of shopping has led to an uptick in returns. And if retailers don't find a way to solve for that, they could be in for a serious hit.
Returns have skyrocketed
In 2020, consumers returned about $428 billion in merchandise, according to the National Retail Federation. All told, that represents about 10.6% of total retail sales.
Of that, clothing made up about 12.2%, and when we think about the ways apparel retailers had to adapt during the pandemic, it's not surprising. Many stores that did open during the crisis made the decision to keep their dressing rooms closed. The result? Shoppers were forced to buy items in multiple sizes, try them on at home, and return those that didn't fit after the fact.
It's a tactic online shoppers have long employed. Though more and more retailers have amped up their digital offerings to include interactive size charts, at the end of the day, none of those tools are as effective as physically slipping on a pair of jeans or trying on a pair of shoes. And so between shuttered dressing rooms and a boom in online orders, retailers are now seeing an influx of returned items.
Of course, there are costs associated with heavy levels of returns. First of all, there's the cost of paying people to restock items. Secondly, there's the risk of items sustaining damage in the course of the returns process.
All of this is bad news for retailers, many of which saw their revenue decline heavily in 2020. It's also bad news for real estate investors who own shopping center and mall REITs (real estate investment trusts). If an uptick in returns proves too costly, some retailers could be driven to close stores as a means of compensating.
How to lower return rates
While returns have the potential to hurt retailers, there are steps they can take to reduce them. For one thing, physical stores can reopen dressing rooms and train associates to help customers better navigate their sizing options. They can also work on more accurate product descriptions in the context of online sales. Labeling a shirt as "fuschia" rather than "wild pink" could spell the difference between that item getting bought in the first place or not.
Along these lines, retailers should upgrade their websites to include virtual fitting rooms so that online shoppers can get a better sense of how items might actually fit. It's a strategy Walmart is already employing. Earlier in the year, it announced that it would be acquiring Zeekit, a virtual dressing room service that allows customers to upload photos of themselves for more accurate fittings. The service also lets shoppers choose from models with different body types in lieu of a photo.
Given that the shift to online shopping is unlikely to reverse even once the pandemic truly becomes a thing of the past, it pays for retailers to invest in technology that allows consumers to shop with more confidence. It could save them a world of grief -- and money.