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1 Out Of Every Four Online Shopping Orders Is Returned

Online shopping companies may have expanded their business extensively in the last year, but a disturbing fact of returned or cancelled orders has them concerned, indicate a new research.
Logistics Company Gati, recently conducted an inventory based research and reached the conclusion that one out of every 4 orders placed on majority of the shopping portals, is returned.

Speaking about the phenomenon, Harshall Bhoi, Head, e-Commerce Operations, Gati, said,
“Nearly four lakh shipments are delivered across the country every day, 25% of them are returned, making it a growing concern for e-tailers.”
Translated it means, about 1 Lakh orders placed via the online portals are either returned or cancelled. Needless to say, such a return-rate is certainly detrimental to the growth prospects of any portal. At present, technology and jewelry SKUs are the most returned items.

How big an impact does returned merchandise have on any operation?
e-Commerce companies are currently in the phase of acquiring customers. Hence many are burning way more cash than what they are making. Policies such as Predatory Pricing (routinely lower prices), Free Shipping and lenient Return Policies already weigh down the company’s financial resources.
On top of that, if merchandise is returned, it can push up the average cost of delivery by as much as 50%. By a general estimate, the total loss to the e-tailing industry solely due to shipment costs of returns currently comes to about Rs. 330 Crores a year.

What are e-retailers doing about the same?
The problems are compounded when the mode of payment chosen by the customer is Cash On Delivery (COD), which in itself is an expensive option for the e-Commerce Portal. Fortunately logistics companies like Gati have come up with an interesting proposition. Instead of couriering the returned product back to the e-tailer, these companies are now willing to store such merchandise in a regional warehouse, until a new order for the same SKU is generated.

Online retail is certainly a very tricky game where already low margins are routinely affected by such occurrences. However, owing to extensive competition, these companies have to bear it out. With returns comprising 25% of all orders, will these companies come-up with alternate pricing techniques or technologies to quickly resell such merchandise?