In the bustling world of Australian retail, a silent profit-drainer is increasingly commanding attention in boardrooms across the nation: retail returns. While international data suggests that serial and slow returners can generate nearly 50% of all returns, the Australian retail landscape faces its own unique challenges in this space.
For Australian retailers, each returned item represents more than just lost revenue. Retail returns also represent reverse logistics costs, inventory management challenges, and potentially damaged products that may never return to their original value. With the Australian e-commerce market experiencing double-digit growth in recent years, the returns problem has only magnified.
This comprehensive guide examines the true cost of retail returns for Australian franchises, shopping centres, and retailers, providing brands with actionable strategies to reduce return rates while maintaining customer satisfaction.
Drawing on extensive industry research and our experience working with more than 750 leading Australian brands over the past 20 years, we offer a roadmap to transform your retail returns process from a profit-draining necessity to a strategic advantage.
The Full Scale of the Retail Returns Problem
Recent industry analysis shows that Australian online brands experience retail return rates of between 20-30% in categories like fashion and apparel, slightly lower than global averages but still representing billions in lost revenue annually.
While comprehensive Australian-specific return behaviour segmentation is limited, our work with retail clients across the country shows patterns similar to international trends:
- Serial returners: These customers represent around 10% of your customer base, but can generate over 30% of all retail returns. They frequently purchase multiple variations of the same item with the explicit intention of returning most.
- Slow returners: Taking weeks or even months to return items, these customers create inventory management challenges and tend to return products in conditions that prevent resale at full price.
- Occasional returners: Representing the majority of shoppers, these customers return items infrequently and usually for legitimate reasons like incorrect sizing or product defects.
- Efficient returners: These customers return quickly and in line with policy, minimising the disruption to inventory management.
The Generational Divide in Retail Returns Behaviour
Our research with Australian brands reveals interesting patterns in retail return behaviour across the most active shopping generations.
Gen Z (Born 1997-2012)
Australian Gen Z shoppers show the highest propensity for retail returns, with approximately 35% admitting to returning items regularly. This generation has grown up in an era where free and easy returns are expected as standard. They’re also more likely to purchase items specifically for social media content before returning them – a practice colloquially known as “wardrobing” in fashion circles.
These digital natives research extensively before purchasing but are also more likely to order multiple variations of a product with the intention of returning most – effectively using their homes as changing rooms or showrooms for their social media accounts.
Essentially, wardrobing is considered a form of first-party returns fraud. Research suggests that Gen Z are largely responsible for the surge in retail returns, however other generations also contribute to the massive hidden costs in retail returns.
Millennials (Born 1981-1996)
At around 30% retail returns rate, Australian Millennials closely follow Gen Z in return behaviour. However, their motivations differ slightly. Millennials are more likely to cite product quality not meeting expectations as their primary return reason, suggesting they’re less tolerant of discrepancies between online descriptions and actual products.
As the generation that experienced both pre-internet and digital retail, Millennials have high expectations for seamless omnichannel experiences, including returns.
Gen X (Born 1965-1980)
With approximately 20% return rates, Gen X shoppers in Australia demonstrate more restraint. Our research indicates they’re more likely to thoroughly research purchases and read reviews before buying, resulting in fewer “impulse returns.”
When they do return items, it’s typically for functional reasons rather than preference changes. They’re also more likely to be deterred by complicated return processes, which may also be a contributing factor to their restraint around retail returns behaviour.
Baby Boomers (Born 1946-1964)
At just 10-15% return rates, Baby Boomers show the lowest propensity for retail returns among Australian shoppers. This generation often views returns as a last resort rather than a standard part of the shopping experience.
They’re less likely to purchase multiple variants of the same item and more likely to accept minor product disappointments without initiating returns. However, when they do return items, they typically expect high-touch customer service, good value from the exchange, and that the returns process establishes connections for the future.
The True Cost of Retail Returns for Australian Brands
The financial impact of retail returns extends far beyond the refunded purchase price:
- Processing costs: Each retail return costs an Australian retailer approximately $15-30 to process when accounting for staff time, quality checks, repackaging, and restocking.
- Logistics expenses: Return shipping costs Australian retailers an estimated $8-12 per item, with higher costs for regional and remote areas.
- Inventory disruption: Returned items create inventory inconsistencies and may miss prime selling periods, particularly for seasonal merchandise.
- Resale value reduction: Only about 70% of returned products can be resold at full price, with the remainder sold at discount, liquidated, or sometimes destroyed.
- Environmental impact: Returns generate over 15,000 tonnes of landfill waste annually in Australia, creating sustainability concerns that increasingly matter to consumers and stakeholders.
For a mid-sized Australian retailer with $50 million in annual revenue and a 25% retail returns rate, the total cost of returns can exceed $3 million annually when all factors are considered.
Strategic Solutions: Transforming Your Return Management
In today’s competitive Australian retail landscape, effective retail returns management isn’t just a cost-saving measure – it’s a potential source of competitive advantage. Retailers who master this aspect of operations can improve profitability while maintaining customer satisfaction.
These are our best strategic solutions to transform your retail returns management, and take back your lost revenue.
1. Understand Your Customers’ Retail Returns Behaviour
Before implementing solutions, gain deep insights into why your customers return products. This is where Retail Doctor Group’s proprietary Limbic Insights™ provides invaluable data. By analysing return patterns, customer feedback, and purchase behaviours, Limbic Insights™ helps identify the specific drivers behind retail returns in your business.
The proprietary Limbic Insights™ methodology examines both the rational and emotional factors influencing return decisions, offering a comprehensive understanding of customer behaviour that goes beyond traditional analytics. This neuroscience-based approach reveals the subconscious drivers behind retail returns behaviour, allowing for more effective interventions.
Action Steps for Retailers
- Conduct retail returns reason analysis across customer segments
- Implement post-return surveys to gather detailed feedback
- Use Limbic Insights™ assessments to understand emotional drivers behind those retail returns
- Identify your highest-returning customer segments and product categories
2. Optimise Product Information and Imagery
One of the primary reasons for retail returns is the gap between customer expectations and reality. Detailed, accurate product information and high-quality imagery can significantly reduce “expectation gap” returns.
Action Steps for Retailers
- Provide comprehensive size guides specific to Australian body types
- Include multiple high-resolution images showing products from all angles
- Add detailed specifications and measurements for all products
- Incorporate user-generated content and reviews to provide social proof
- Consider advanced visualisation technologies like augmented reality for applicable products
- Implement 360-degree product viewing for complex items
3. Implement Strategic Retail Returns Policies
Your retail returns policy shouldn’t be an afterthought – it should be a strategic tool that balances customer satisfaction with business profitability. Our Fit for Business™ retail skills training modules include specific components on developing and communicating effective return policies.
Learn more about The Retail Doctor Academy here:
Action Steps for Retailers
- Consider tiered retail returns policies based on customer loyalty and purchase history
- Implement return time limits appropriate to your product category
- Clearly communicate return policies at multiple touchpoints
- Consider restocking fees for certain customer segments or product categories
- Train staff on appropriate policy enforcement through our Fit for Business™ modules
- Create special handling for high-value or frequently returned items
4. Enhance the Pre-Purchase Experience
Reducing retail returns starts before the purchase is even made. Our Strategic Reviews and Workshops help retailers identify opportunities to improve the pre-purchase experience, reducing the likelihood of returns.
Action Steps for Retailers
- Implement guided selling tools to help customers make informed choices
- Provide detailed size and fit recommendations based on customer profiles
- Use customer data to personalise product recommendations
- Offer virtual try-on technology for applicable products
- Train sales staff to ask qualifying questions that reduce retail returns probability
5. Streamline the Retail Returns Process
While reducing retail returns is the obvious goal, making the process efficient when returns do occur minimises their impact on profitability. Our Deployment Roadmaps help retailers optimise their returns management process.
Action Steps for Retailers
- Centralise retail returns processing to achieve economies of scale
- Implement technology solutions for quick returns assessment and routing
- Train dedicated returns specialists through our Fit for Business™ modules
- Create clear standard operating procedures for returns handling
- Establish partnerships with logistics providers specialising in reverse logistics
6. Create Retail Returns Reduction Incentives
Strategic incentives can encourage customers to keep items rather than return them. These need to be carefully balanced against the cost of processing retail returns.
Action Steps for Retailers
- Offer partial refunds or store credit for customers willing to keep items
- Implement loyalty points bonuses for low-return customers
- Create “final sale” discounts for items with historically high return rates
- Develop special promotions specifically targeted at high-return customer segments
- Consider free return shipping only above certain purchase thresholds
Transform Data into Action with Retail Doctor Group
Implementing these strategies requires a comprehensive understanding of your specific retail environment. Retail Doctor Group’s holistic approach combines deep retail expertise with data-driven insights to create customised retail returns reduction strategies.
Our comprehensive service offering includes:
- Limbic Insights™ Assessments to understand the emotional and rational drivers behind retail returns behaviour
- Fit for Business™ Training to equip your team with the skills needed to reduce returns
- Strategic Reviews and Workshops to identify specific return reduction opportunities
- Deployment Roadmaps to implement solutions in a structured, measurable way
- Ongoing Support and Coaching to ensure sustainable improvement
The key is approaching returns strategically rather than viewing them as an unavoidable cost of doing business. By understanding customer behaviour, optimising policies, enhancing pre-purchase experiences, and streamlining processes, Australian brands can significantly reduce retail return rates and reclaim their margins.
To learn how we can help your business address the returns challenge, contact Retail Doctor Group today for a confidential consultation.
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✉ businessfitness@retaildoctor.com.au
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