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Necessary burden? Why ecommerce returns are proving to be a billion-dollar headache for the industry
Garima Capoor Nanda takes pride in co-founding and running an online venture, Plantables, that sells eco-friendly stationery such as calendars and wedding invitations made of seed papers. But handling return orders can sometimes threaten to run companies like hers into the ground.
“Whenever we receive a returned item, it is almost in an unusable condition,” says Nanda, 32, who started Plantables in December 2018. She explains that customers mostly don’t take the effort to properly pack a returning product. It is not really their responsibility, she says, but it affects their bottom line. The merchandise passes through several transit points before reaching the seller. Sometimes the product cannot be even resold because of damage during the return process.
Many entrepreneurs like her have been able to reach a national or even international market through e-commerce. The ability to order from anywhere, pay easily and get the product at home offers unmatched convenience. Once the safety issues around payment were addressed, a major hindrance for people to buy goods online was that they missed the “touch and feel” experience that they got from a brick-and-mortar store. E-commerce companies addressed that discomfort by allowing buyers to return purchased products as conveniently as they purchased these — with a click on the app. However, the same return policy that fuelled their sales has become a millstone around their necks. According to a report quoting RedSeer Management Consulting, the e-commerce industry in India clocked sales of $18.6 billion in 2017, but over 30% of this was affected by returns and order cancellations. Now with Covid disruptions, the geopolitical turmoil and rising inflation hurting e-commerce companies like never before, these entities are looking to streamline operations and bring down some expenses.
Amazon India and Flipkart did not answer questions on what percent of sales or revenue is affected by returns in this period. RedSeer didn’t have the latest information about this. But experts at the internet-focussed consulting firm confirm that returns pose one of the biggest problems for online retailers. It uses up a major part of an online seller’s resources, yet it is a cost and no revenue is made from it. A major part of the returns cost is borne by the merchants who listed the products concerned. Platforms like Amazon and Flipkart determine the cost merchants have to pay for returned orders based on the reason for return, they say.
“The return cost can typically range from Rs 50-150 for smaller items and up to Rs 500-600 for heavier shipments based on the logistics cost that the platform had to incur for delivery. On an average, for an order of Rs 1,000, merchants may pay up to 10-15% as cost because of returned orders,” RedSeer adds.
Read More at https://economictimes.indiatimes.com/small-biz/sme-sector/necessary-burden-why-ecommerce-returns-are-proving-to-be-a-billion-dollar-headache-for-the-industry/articleshow/90791255.cms