Free returns, a way to lure customers to do online shopping

The bug of ‘free returns’ has bitten the eCommerce players and has left the Indian online shoppers smitten. According to Forrester Research, online shoppers in India, return at least 25-40 per cent of the apparel purchased by them. In comparison, the return rate in developed markets like the US or the UK ranges between 15 and 25 per cent.

Free returns, in India, is a very common phenomenon in India. Depending on a specific product category in fashion “around 25-35 per cent is the return rate on an average for the year. This number could go as high as 40 per cent during sales or events,” explained Satish Meena, Research Analyst, Forrester Research who tracks the Indian retail sector.

The return rate trend in the UK is about 25 per cent whereas, customers in the US return at least 15-20 per cent of the garments purchased on a yearly basis. Returns are the least in Japan at around 5-8 per cent, according to Meena.

Fouzia Bukhari, a 27-year-old marketing professional is a self-proclaimed shopaholic. Sheorders apparel online if there is a good sale or deal at least once a month. The Pandemic, too, hasn’t deterred her from ordering online.

On a scale of 10, she would return products at least once or twice, “In fact, today only a delivery boy picked up a return of apparel that didn’t fit me,” she quipped, adding that returns are a given with online shopping, “things don't fit us as good as they fit the models mostly,” she said.

Bukhari isn’t alone. Sources at Ajio said that on an average, 26-30 per cent of the products purchased are returned or exchanged by the customers. An industry expert said that Ajio’s counterpart, Flipkart-owned Myntra sees a similar trend of returns. Whereas, a Big Bazaar spokesperson said that for its offline stores, the returns were at a single-digit.

Uma Talreja, Customer Care Associate, Chief of Marketing and Customer Officer, Shoppers Stop Ltd. “We are seeing a falling rate on returns on the e-commerce side as well which is approximately 20-30 per cent lower already than before the lockdown,” Sources at Ajio too have seen a dropping trend of returns.

On a monthly basis, logistics company, LetsTransport, handles over 25 per cent reverse pickups Pushkar Singh, CEO & Co-founder, LetsTransport said that, It costs INR 50 to INR 100 basis the function of size or location, etc.”

Unlike any country, we’re the only country that offers free delivery, free returns, and door-step refund. To top that, Indian eCommerce players offer hefty discounts, too.

Impact on cost

The question remains, why would companies take on that cost to impact their bottomlines. Anil Talreja, Partner, Deloitte India,Talreja said that the players’ hedge cost of possible returns into the account of the final price of the product, “For now, companies cannot discontinue this policy, despite it being a cost, it’s part of the game,” he said.

When BusinessLine asked analysts if free returns were a way to lure customers to shop online he said “Absolutely, it is a great gimmick, it’s also related to the lower internet penetration and eCommerce usage in India than its counterparts. Gradually, as customers become mature with eCommerce, it will stop.”

A retail industry player said that it is a very common practice for customers to order multiple styles and sizes at one go to avoid the hassle of reordering. So the customer chooses the best fit, and style and with a click of the button, its product is picked from your doorstep.

“Globally, too, eCommerce players are pushing customers to try clothes and return the rest,” a source at Ajio said.

A Morgan Stanley report projected India's 670 million internet users to rise to 914 million by 2027 and online shoppers to jump to 590 million from 190 million in 2020.

However, at some point of time, players will have to understand that a business needs to be viable, too, said one of the persons quoted above.

“In order to get lesser returns, when a customer logs in to our portal and has made a purchase, through AI we offer solutions to the customer for the best fit in each brand for the customer,” the person at Ajio said.

Whereas in order to reduce returns, ShoppersStop’s ‘Personal Shoppers’ present on the floor at its store assists its customers in-store as well as online via video calls and suggests the best possible solutions, thus, they have seen a very low return rate in-store.