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Online retailers see fewer product returns

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  • The drop in return rates is triggered by online shoppers making more informed decisions compared to impulse buying earlier, which was driven by flash sales
  • Third-party logistics firms which cater to e-commerce clients predict that return rates in the industry have fallen by almost half

Return rates on e-commerce orders have seen a drop even as Indian e-tail has seen huge growth in both metros and smaller cities, with a spike in first-time users shopping online that was accelerated by the ongoing pandemic.

The drop in return rates is triggered by online shoppers making more informed decisions compared to impulse buying earlier, which was earlier driven by flash sales.

The decline in return rates could also be attributed to customers choosing prepaid online payment methods during checkouts, which ensures that they don't want to miss the delivery of the product.

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Higher return rates earlier were also triggered by unavailability of customers at the delivery address. Now, with individuals continuing to stay at home, likeliness of customer unavailability at the delivery address has reduced only further.

“Return orders have decreased with increasing share of prepaid orders where the return rate is lower as customers have already paid for the product and don't want to miss the delivery of the product. Both e-commerce platforms and logistics players have made conscious effort to standardize the delivery address over the years which has resulted in reduction of return to origin orders," said Saurav Chachan, engagement manager at RedSeer.

Chachan added that the return order rate is independent of category, and is generally high for cash-on-delivery orders and also due to non-standardized addresses in Tier 2 cities.

According to Redseer data, return rates for leading horizontal platforms (like Flipkart and Amazon) have fallen from 22% in the last year to 18-20% currently, while for top fashion verticals it has decreased from 30% to 25% at present.

While the drop might look small, the overall delivery volumes have also increased for the industry.

For instance, the overall e-commerce market recovered to 1.6x of January, 2020 volumes by August, last year and subsequently, 3.5x of year-start volumes by October last year, driven predominantly by the festive sales of leading horizontal players, Redseer data showed.

“Over the course of the year, as consumers spend more time at home, they are able to make more informative and concrete decisions while purchasing on the platform - in turn leading to reduced return rates. Categories such as devices, appliances and furniture continue to see low returns as consumers make confident purchases. At Flipkart we expect this trend to continue owning to consumers increased trust in e-commerce and digital transactions," said a Flipkart spokesperson.

Third-party logistics firms which cater to e-commerce clients predict that return rates in the industry have fallen by almost half.

“Customers are taking a more measured approach on what they would like to order and buying what they really want. This is a strong shift from the consumer behaviour around impulse buys. Returns in the industry are much lower now and probably 14% of all e-commerce orders are returned as compared to 25% at pre-covid levels," said TA Krishnan, CEO and co-founder, Ecom Express said in an earlier interaction.

Ecomm Express works as a logistics partner with large e-commerce firms, including horizontal and vertical platforms.

Logistics unicorn Delhivery’s chief business officer Sandeep Barasia said customer stickiness led to lowering of doorstep returns.

“People looked at e-commerce more seriously," Barasia said.

Supply chain and logistics in the country was completely disrupted due to the lockdown last year, as demand for essentials on online platforms surged leading to failed and wrong deliveries.

"The returns by customers in 2020 are significantly lower than 2019. However, the returns by courier partners on account of disruption in the logistics chain are higher this year," said a Snapdeal spokesperson.

(With inputs from Madhurima Nandy)

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