DynamicAction Blog

A Lesson Plan for Avoiding Returns and Saving Billions in Revenue


“Back to school, back to school, to prove to dad that I'm not a fool.  I've got my lunch packed up, my boots tied tight, I hope I don't get in a fight.  Ohhhh...back to school.”

For Billy Madison and all of the students returning to school over the next few weeks, the goal is pretty simple, go to school, make the grade and stay out of trouble. But students aren’t the only ones with new lessons to learn.

This summer DynamicAction released new research from IHL Group, “Retailers and the Ghost Economy: The Haunting of Returns.” A quick glance at the report reveals that retailers have some valuable lessons to learn regarding how to avoid costly returns. A few simple steps can go a long way towards saving the industry $642.6 billion a year in global revenue.

To help get retailers on a path towards fewer returns and greater revenue gains, here are a few fundamental strategies that can be implemented once retailers have the ability to track and review the reasons for returns.

  • Track, share, review. Every year, retailers lose $162 billion in revenue due to poor quality, damaged or defective items. Track, share and review returns that are caused by these items with buyers and merchants to recapture revenue and avoid these issues for next year
  • Improve in-store signage and product descriptions. To avoid returns due to customers purchasing the wrong items, a $99.3B annual loss for to retailers, work to improve in-store signage, train associates within stores and improve descriptions online. Accurate descriptions go a long way towards gaining shopper trust and saving the industry over $6 billion a year in lost revenue. This will result in not only fewer returns, but also happier and more loyal customers.
  • Reinforce positive purchases. Buyer’s remorse drives 14% of all returns. Retailers can combat this by reinforcing purchases and communicating to customers that they “made a great choice” in order to reduce this loss.
  • Offer price comparisons. Retailers lose $83.4 billion because of customers return items when they find a better price elsewhere. By implementing price comparison platforms and a dynamic pricing strategy, retailers can eliminate a lot of these pricing competition issues.
  • Encourage gift cards and store credit. Consumers often return gifts they don’t want, which might be the most difficult return cause to reverse. However, since this accounts for 10% of all returns, retailers can begin by encouraging gift givers to purchase gift cards. When items are returned to the store, retailers can offer store credit in the hope of recapturing the revenue in future sales with an upsell along the way.
  • Ensuring a perfect fit. An additional 10% of returns are caused by wrong sizes. Unfortunately, there are no standards in sizing. However, retailers can use their systems on the front end and back end to help. Retailers can better communicate what their sizes equate to in their stores and on their websites. Sizing reminders for previous purchases can also help.
  • Maintain fraud awareness. Return fraud leads to $28.2B worldwide annual loss. This happens when items not purchased at a retailer’s store are returned. Systems and national registries that track scammers can be used to reduce this annual revenue loss.
  • Deliver on time! Another issue that is often related to online sales is order fulfillment – a whopping $4.6 billion of sales are lost due to late deliveries. This issue transcends retail categories and the lesson here is to not over-promise in the first place. It is always best to have systems in place than can accurately predict the exact delivery day of an item, with the exception of weather-related obstacles.

By following these simple lessons, retailers are sure to make a passing grade in returns this year!