Retailers Hope Virtual Try-Ons, Clothing Rentals Cut Down on Returns

With the holiday shopping season upon us and Christmas just over two weeks away, retailers are gearing up for another annual consumer event: return season, which typically kicks off in early January as the glow of holiday happiness diminishes.

After last year’s holiday season, 63% of consumers said they planned to make returns, according to PYMNTS research, with one-third going inside the store to make the return and 31% using a mailing service. Another 21% utilized a merchant-designated drop-off location.

In 2020 overall, consumers returned $428 billion of merchandise in 2020, according to the National Retail Federation, representing approximately 10.6% of all retail sales made. This rate of returns was in line with other recent years, though online returns more than doubled between 2019 and 2020.

Read more: 2020 Holiday Shopping Retrospective Report

Since then, many retailers have actively sought ways to decrease the number of returns they have to process, as reverse logistics can get costly for merchants. Some, such as Gap, have adopted virtual try-ons, allowing customers to use augmented reality (AR) to see how an item might look. Others, including Rebecca Minkoff, Banana Republic and Express, are using clothing rentals, which let people try clothes for a short period of time at a small fee before committing to keeping them in the closet.

Clothing rentals and virtual try-ons can also help cut down on “bracketing,” or the practice of ordering multiple sizes of a product with the intention of returning the ill-fitting items.

Related news: MySize CEO: The ‘Free Returns’ Retail Model Is Unsustainable

Beyond apparel, several electronics brands also implement software that detects when a consumer is having an issue that may cause a return and helps to remedy it.

“We want to have a situation where for every problem, the consumer gets an immediate solution from the product they’re using,” Tsiki Naftaly, co-founder and co-CEO of Copilot, told PYMNTS.

Also see: 65% of Consumer Electronics Returns Occur During Setup

No, You Keep It

But even if a customer wants to return an item, whether because of quality issues, incorrect sizing or any other reason, some retailers might decide it’s easier — and cheaper — to just pay the customer to keep the item. Amazon and Walmart earlier this year began telling customers to keep unwanted items rather than send them back while still offering a refund, using artificial intelligence (AI) to cut down on work and costs for the companies. The option is also determined on a case-by-case basis, depending on the individual customer’s purchase history and the cost of processing the return.

Read more: Skip It: Amazon, Walmart Tell Consumers to Keep Unwanted Gifts

And though this might mean a customer ends up with something they don’t want anymore, they don’t seem to mind — it’s the money that matters. PYMNTS data show that offering discounts as little as 5% could persuade 39% of consumers to keep holiday purchases they intended to return, and a 30% discount would be enough to keep nearly 60% of shoppers from returning items. 

You may also like: 51% of Consumers Would Keep Goods for Discounts 

Additionally, consumers may ultimately be able to make a profit on items that are refunded by merchants but not sent back. Secondhand platforms such as eBay, Poshmark, Craigslist and Facebook Marketplace allow people to sell directly to each other, with unboxed and brand-new items often fetching much higher sums.

Fighting Fraud

Retailers also have to be wary of fraudulent returns in which a customer returns something that is not eligible for return, whether it’s outside the policy window or because an older item has been swapped into the box in place of a more recent purchase. PYMNTS research, conducted in collaboration with Forter, found that 44% of retailers have experienced return abuse over the past 12 months, and 66% of companies said it has gotten worse in the past year.

The National Retail Federation estimates that nearly 6%, or $25.3 billion, of returns made in 2020 were fraudulent.

More details: Merchants Lose 2% of Sales Every Year to Return and Promotion Policy Abuse

Still, retailers are inclined to make the return process as easy as possible, even if it means accepting an increased risk of fraud. David Morin, senior director of retail and client strategy at Narvar, told PYMNTS that “it’s really critical for retailers to think about how to make the overall experience as easy as possible, as frictionless as possible and as seamless as possible.”

“Because so many more people are trying new brands, they’re also likely going to try more returns experiences, and having that really seamless experience builds that trust and peace of mind,” he added.