📌Impact of Return Policies on Consumer Experience in Major U.S. E-commerce Companies📦
Impact of Return Policies on Consumer Experience
in Major U.S. E-commerce Companies📦
Intro.
The U.S. retail industry faces significant costs and losses each year due to product returns. With the expansion of online shopping, return rates have surged, leading companies to modify or tighten their return policies. These changes are affecting customer satisfaction and purchasing decisions.
Furthermore, ahead of Black Friday and the Thanksgiving season, major e-commerce companies such as Walmart, Amazon, and Home Depot are attempting to boost sales through large-scale discount events. However, the growing burden of return costs due to increased return rates has become a new issue.
This report analyzes the relationship between return policies and consumer behavior among major U.S. e-commerce companies. It aims to propose strategies for designing effective return policies and improving consumer experiences.
Overview of collection data🔎
Why Reddit was used for analysis👀
Reddit is a leading social community site in the United States where American consumers freely exchange opinions on various topics.
Subreddits, which are organized by topic, allow for a detailed examination of consumer experiences and perceptions regarding specific brands, services, or policies.
Due to these characteristics, Reddit is considered a suitable platform for collecting authentic consumer emotions and opinions related to return policies.
Current state of returns in U.S. retail and E-commerce trends
✔️Current state of returns in U.S. retailer
The U.S. retail industry incurs significant losses and costs annually due to product returns. According to the 2022 and 2023 reports by the National Retail Federation (NRF) and Appriss Retail, total retail sales in the U.S. reached approximately $5.13 trillion in 2023, with 14.5% of this equivalent to $743.8 billion returned. While this marks a slight decrease from the 16.5% return rate in 2022, the burden of returns remains substantial. Notably, fraudulent and abusive returns accounted for 13.7%, totaling approximately $101.9 billion in losses.
The growth of online shopping has driven online return rates up from 10.7% in 2022 to 17.6% in 2023. Additionally, the BORIS (Buy Online, Return In-Store) method, where customers return online purchases to physical stores, represents about 49.7% of all online returns, further straining brick-and-mortar operations.
Notably, a significant portion of returns stems from buyer’s remorse or returns after minimal use, rather than product defects. This imposes additional financial burdens on retailers, including logistics costs, inventory management, inspection, and resale expenses.
✔️The relationship between E-commerce return policies and consumer trust
Many companies are adjusting or tightening their return policies to address return-related challenges. Complicating return procedures or imposing additional fees can create negative experiences for consumers, leading to a decrease in conversion rates and repeat purchases.
In e-commerce, where purchases occur via remote transactions, consumers cannot fully assess product quality or value until they receive and use the item. These characteristic increases the uncertainty of the purchasing process, leading consumers to perceive return policies as a key factor in purchasing decisions.
This report leverages OBERLO's 2024 insights to analyze the return policies of the top 5 e-commerce companies based on sales revenue (Amazon, Walmart, Apple, eBay, and The Home Depot). By examining consumer discussions on these companies’ return policies, this study explores how return policies impact consumer experience and purchase behavior. This aims to identify the key factors in return policies that influence consumers, improve customer satisfaction, and address issues related to product returns.
Analysis categories of E-commerce return policies
✔️Category selection
To systematically analyze the impact of return policies on consumer experience and purchasing behavior, the data was classified into five key categories.
The category selection process incorporated meta-analysis to reflect elements that consumers directly experience or perceive as important during the return process. Each category was designed to represent the core aspects of return policies.
✔️Selection criteria
① Reflection of consumer experience
Captures key issues that arise during the return process based on consumer experiences, identifying problems that are most significant from the consumer's perspective.
② Comprehensiveness of policy analysis
Designed to encompass various areas affected by return policies (procedures, consumers, logistics, products, and ethical responsibility) to ensure a holistic evaluation of their impact.
③ Suitability for data analysis
Structured to efficiently map text data into categories using a user-defined keyword dictionary, enhancing the effectiveness of text analysis.
✔️Classified categories
① Process & Conditions
Return and refund procedures, refund delays, customer service issues, etc.
② Customer Experience & Loyalty
Satisfaction during the return process, cases of dissatisfaction, brand trust, and repurchase intentions.
③ Shipping & Logistics
Factors such as shipping delays, logistics costs, packaging issues, and logistics operations during the return process.
④ Product Issue
Factors directly causing returns, such as product defects, damages, or mismatched specifications.
⑤ Ethical & Social Responsibility
Elements related to environmental protection and social responsibility.
[Keywords by classified category]
✔️Limitations of data classification
① Contextual Limitations: Classification based on a user-defined dictionary may fail to fully capture the context, leading to challenges in accurately categorizing certain data.
② Representativeness sample : Reddit data may reflect the opinions of specific consumer groups, so care must be taken when generalizing it to the opinions of the overall consumer population.
In-depth analysis by return policy category
✔️Category-wise data distribution