📌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 link between return policy and consumer experience

✔️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

The ‘Other’ category, which accounts for 70.4% of the total data, includes general opinions or brief mentions on Reddit that are not directly related to return policies. Therefore, this analysis focuses on the main five categories, excluding the ‘Other’ category.

Analyzing the distribution of data across the five main categories shows that ‘Customer Experience & Loyalty’ has the highest share at 39.8%. This is followed by ‘Product Issues’ (33.0%), ‘Process & Conditions’ (18.1%), ‘Shipping & Logistics’ (4.7%), and ‘Ethical & Social Responsibility’ (4.5%).

The fact that ‘Customer Experience & Loyalty’ holds the largest share in discussions on return policies indicates that the return process is not just about problem resolution but a key factor in building trust between businesses and consumers. This suggests that companies need to take a strategic approach to return policies, focusing on providing a positive experience during the return process rather than merely using them as a tool for cost reduction.

The second-largest category, ‘Product Issues,’ highlights the importance of supply chain management (SCM) and quality assurance for e-commerce companies. Practical solutions are needed to identify and address key return problems, such as product defects or specification mismatches, in advance. While the data share for ‘Shipping & Logistics’ and ‘Ethical and Social Responsibility’ is relatively small, considerations for logistics services, environmental protection, and sustainability will play an increasingly significant role in the future.

 

✔️Exploring consumer insights through category-specific keyword analysis

📌[Customer Experience & Loyalty]

Main keywords : "customer(3,713)", "issue(3,286)", “return(2,917)", "problem(2,438)", “customer service(846)”, “membership(484)”

[Customer service on major E-commerce platforms]
Fast and efficient customer service (“customer service (846)”) from major e-commerce platforms like Amazon (“amazon (2,313)”) is positively recognized by consumers. However, some consumers expressed dissatisfaction with customer support (“support (1,280)”) that fell short of their expectations.

[Membership and subscription programs]
Keywords such as “prime (419),” “membership (484),” and “subscription (207)” show that major e-commerce companies are using membership and subscription programs to attract consumers. However, over time, reductions in membership benefits, price increases, and declining service quality have led to growing consumer dissatisfaction, with some cases negatively impacting purchase decisions.

- I think loyalty programs would be a great way to offer longer return policies/free returns to customers who did abuse the practice. Another option is a blanket policy like, “Your first 2 returns per year are free, and after that you pay for any additional returns,” 2022-09-08 - I have been buying from Amazon for years. My experience has been good overall, and customer service has been exceptional. 2023-12-02 - ... my worst experience by far was an Amazon purchase. The ridiculous push to raise stock prices by decreasing cost means that customer service, and the treatment of customers in general, it’s just going to get worse and worse. 2023-12-01

📌[Product Issue]

Main keywords : "book(3,105)", "people(1,793)", "return(1,523)", "library(1,112)", "kindle(586)", "price(529)"

[Product quality management]
Analysis of consumer experiences regarding product quality revealed frequent issues, particularly with Amazon (“amazon (1,087)”) and its digital content, Kindle (“kindle (586)”), where problems such as quality deterioration and low value for the price were commonly reported. This indicates that quality issues not only affect physical products but also digital content, causing consumer dissatisfaction and potentially leading to an increase in return requests. Therefore, companies need to focus on strengthening quality control for both physical products and digital content.

[Warranty and after-sales support]
Consumers often attempt to use warranties (“warranty (200)”) to resolve product issues. However, they frequently express dissatisfaction due to the cumbersome procedures and limited support associated with warranty services.

- I've returned a couple, but it was mostly due to huge quality issues in the kindle version making the book almost unreadable. 2020-10-24 - But if you install a spare part, you can't return it unless as a warranty claim. 2022-12-03 - Walmart's return policy is a double edged sword. It's awesome how easy it is to return something, but ..... I bought a Smash Bros OLED Switch recently, brought it home, and it was obviously opened already. 2024-02-10

📌[Process & Conditions]

Main keywords : "return(7,322)", "return policy(3,668)", "refund(1,821)", "money back(1,254)", "time(958)“

[Confusion caused by changes in return policies]
Consumers reported feeling confused due to changes in return policies (“return policy (3,668)”) and varying policies among different sellers (“seller (973)”). This confusion often led to questions and complaints. In particular, cases where returns that were previously allowed became impossible under new policies, or where refund procedures became more complicated, resulted in increased consumer dissatisfaction.

[Refund procedures and costs]
Consumers often expected a full refund (“full refund (557)”), but there were cases where only a partial refund (“partial refund (224)”) was provided. Additionally, long refund processing times caused further inconvenience and frustration among consumers.

- Some products don't have free return shipping,... sellers are kind of shady. 2019-05-26 - Amazon really has become awful... Every piece of furniture I bought from Amazon had smashed corners and customer service gave me partial refunds for the inconvenience. After all of their policy changes this past year.....I’ve had prime for probably a decade at this point and now I’m thinking the same as you. Maybe Walmart+ is better. 2024-01-20

 

📌[Shipping & Logistics]

   Main keywords : "shipping(862)", "delivery time(238)", "shipped(290)", "package(103)", "label(93)", "UPS(75)"

[Key complaints related to shipping]

Major complaints regarding shipping included delivery delays, damaged packaging, and missing labels. In particular, issues with delivery time (“delivery time (238)”) were repeatedly mentioned.

[Additional costs and service quality]
Some consumers expressed dissatisfaction when they expected free shipping (“free shipping (59)”) but were instead required to pay additional costs (“cost (128)”). Poor packaging quality and declining shipping service standards also eroded trust in specific logistics services and companies.

[Issues with logistics and shipping companies]
Rather than returning products directly to major e-commerce companies, consumers often used logistics and shipping providers such as UPS (75), USPS (50), FedEx (31), and DHL (25). Various problems encountered during this process were frequently mentioned.

- Every single box that contained books came to DHL damaged, ... but they always thought it was my fault of course. Lol 2019-07-08 - Amazon’s “green” return policy is incredibly stupid.it's more expensive for them to pay return shipping and pay a worker to inspect and deal with the case. 2024-10-23

 

📌[Ethical & Social Responsibility]

Main keywords : "people(353)", "trash(191)", "garbage(189)", "waste(169)", "environment(128)", "recycling(69)", "nature(59)", "climate(35)“

[Environmental impact and concerns]
Consumers frequently mentioned the environmental impact of returns and shipping processes, with particular concerns about waste issues such as “trash (191),” “garbage (189),” and “landfill (35).” There were recurring discussions about the need for better waste management solutions.

[Consumer interest in sustainability]
Keywords like “recycling (69)” and “environment (128)” indicate that consumers show strong interest in sustainable return and shipping policies, highlighting the necessity for recycling and eco-friendly approaches.

[Negative opinions on eco-friendly policies]
On the other hand, some consumers felt that companies’ eco-friendly policies were ineffective or inefficient, expressing negative opinions about the actual impact of such policies.

- walmart doesn't have a bottle return service except in states that have bottle recycling deposits.2021-04-27 - you should know that those returned clothes all end up in a landfill. 2024-01-20 - Tired of Amazon damaging books by shipping them with no padding! 2020-10-05 - Retailers’ stricter returns/final sale policies...There's nothing wrong with them but I sell them at a discount because it would be more wasteful and have a bigger environmental impact to recycle (I sell jewellery, not clothes.) 2022-09-08

 A new standard for consumers : Zalando’s Pre-Owned Return policy

[Zalando’s "Pre-Owned" Case ]

Germany's fashion e-commerce company Zalando offers a "Pre-Owned" service where consumers can return unused clothing. The items undergo quality inspection and are either resold on a second-hand platform or exchanged for store credit. This approach encourages new purchases, reduces unnecessary waste, and serves as a leading example of a circular system.

Zalando’s approach reduces customer inconvenience during the return process (Customer Experience & Loyalty) and strengthens quality control (Product Issue), contributing to higher customer satisfaction. By focusing on recycling instead of simple refunds or disposal, it promotes sustainability (Ethical & Social Responsibility). Additionally, efficient return procedures (Process & Conditions) and streamlined platform operations (Shipping & Logistics) simplify the overall return process.

 It is necessary to shift returns from being seen as a mere cost process to a strategy that integrates customer satisfaction, environmental responsibility, and logistical efficiency through such a circular system. This approach plays a key role in achieving sustainable management while enhancing customer satisfaction and improving the quality and efficiency of the entire return process.

Outro.

This marketing brief has identified the specific impact of return policies on consumer experience and purchasing behavior. In particular, it analyzed the key sources of consumer dissatisfaction in the return process and proposed practical solutions for improvement. The suggested circular system offers an opportunity for businesses to evolve beyond viewing returns as a cost issue, instead integrating both customer satisfaction and environmental responsibility. Through this approach, companies can grow into businesses that create positive impacts for both consumers and the environment.