3D and AR
The cost of product returns, and what to do about it
3D and AR

The cost of product returns, and what to do about it

Written by

Rod Reynolds


July 4, 2023

Table of contents

TOC Example

Returns are a natural part of the commerce ecosystem, so it is to be expected that some level of stock will be sent back to the warehouse. But when they start cutting into your profit margins, something has to change.

In 2023, customers returned $743 billion worth of merchandise, accounting for 14.5% of total retail sales, both in-store and online. Taking this into account, minimizing returns by using 3D and augmented reality (AR) to enhance the customer journey can help mitigate the loss.

Try out a 3D and AR experience | Furniture: Balliu

Why companies offer returns  

Retailers implement return policies primarily to incentivize customers to make purchases with confidence. It also alleviates their fear of being stuck with an unsatisfactory item. Accepting returns also builds trust and credibility, indicating the retailer's confidence in their product quality and value. This trust fosters customer loyalty and positive brand perception.

Additionally, a customer-friendly returns policy serves as a marketing strategy, differentiating the retailer from competitors and attracting new customers. This approach expands the customer base, boosts sales, and promotes customer retention.

Returns policies and reasons for returns

When it comes to retail return policies, retailers usually have a set of ‘small print’ rules to adhere to. These typically include specifying a timeframe for returns – usually around 30 days from the purchase date.  

Products should be unused or unaltered before returning, while certain sale or discounted items may be deemed final sale and ineligible for returns. Additionally, most businesses stipulate that shoppers provide a valid receipt or proof of purchase when initiating a return.  

Items are returned to retailers for a number of reasons, some of which are not the fault of the customer. Others could be prevented if changes were made to the omnichannel journey.

Damaged or defective items prompt customers to seek replacements or refunds. Sizing issues with apparel and footwear often result in returns to exchange for a different size. Fast fashion culture contributes to returns as impulse purchases don't always meet expectations, while buyer's remorse drives customers to return items they no longer want. The availability of free return policies encourages more returns as customers feel comfortable making purchases without additional costs. These factors shape return rates and customer behavior in the retail industry.

There are a number of ways this can be alleviated, such as through improved product descriptions, accurate sizing charts, detailed images, and customer reviews. The most valuable addition to your business’s omnichannel approach is the use of 3D and AR to create an immersive shopping experience, such as Snap’s virtual try-ons and Enhance’s See in your Space functionality.

Problems with returns

Returns pose various challenges and implications for retailers, such as financial loss due to processing costs and refunds, operational complexity in managing returns efficiently, and inventory disruptions impacting forecasting and replenishment.

Additionally, there is the need to determine whether the returned items can be resold, the potential negative impact on customer satisfaction and loyalty, and the risk of fraudulent returns.

The environmental impact of waste and carbon emissions must also be considered. The fact is, returns generate a significant carbon footprint. Data suggests that although only 20 percent of returned products are defective, many are liquidated or sent to landfills.  

Trends in customer returns and costs for retailers

The value of returned merchandise grew by almost 75% from 2021 to 2023, underscoring the significance of the problem for sellers. The expense associated with returns includes shipping fees, processing costs, and potential restocking fees, which can significantly impact a company's profitability.  

For online sales, returns are an even more acute problem. In 2023, ecommerce returns totaled $247 billion, equating to 17.6% of all web-based sales. Furthermore, the rate at which returns are rising has overtaken that of overall ecommerce sales growth, necessitating a prompt reappraisal of efforts to tackle the problem. As a result, retailers are exploring strategies to mitigate return costs, such stopping free returns shipping and emphasizing in-store returns.

How retailers try to prevent returns  

To address return rates, retailers employ various strategies. Some, like Amazon, provide visibility on product pages regarding high return rates, empowering customers to make informed purchase decisions and avoid frequently returned items. Others offer discounts, promotions, and incentives to discourage returns, such as loyalty rewards or personalized offers to enhance customer satisfaction.  

Conversely, brands may implement restocking fees or, as is increasingly the case, impose charges for return shipping to discourage non-defective returns, offset processing costs, and promote careful consideration of purchases. However, such measures run the risk of losing customers to competitors.

How 3D and AR lowers return rate and boosts customer satisfaction

The purchase journey is a visual one, so implementing 3D and AR experiences allows customers to personalize and visualize products in real time. This enhances confidence in their purchasing decisions and minimizes returns due to appearance-related factors.

3D and AR technology allows for the creation of interactive and immersive product visualizations – particularly with furniture. By combining virtual elements with the real world, customers can get a realistic view of products before making a purchase. This visual representation helps customers better understand the product's appearance, features, and dimensions, reducing the likelihood of returns caused by unmet expectations.

Augmented reality visualizations let customers try before they buy

One of the challenges of shopping online is the inability to physically interact with products before buying them. AR technology can bridge this gap by providing virtual try-on experiences, allowing customers to visualize how products would look or fit in their own space or on themselves. These immersive experiences enhance customer confidence in their purchase decisions, reducing the need for returns driven by uncertainty.

Furthermore, 3D and AR technology enables retailers to offer interactive and engaging online shopping experiences. Customers can virtually explore and interact with products from different angles, zoom in on details, and even see how products will look in different colors or configurations.

Real-time product personalization

The ability to offer customers live product personalization using 3D and AR has several benefits in reducing returns and addressing customer dissatisfaction with product variations or options.  

Product configurators enable customers to choose colors, materials, and other features, and see the changes in real-time. This interactive experience allows buyers to tailor attributes to their preferences, then visualize the result before making a purchase decision, reducing the chances of dissatisfaction or mismatched expectations.

Furthermore, lifelike visualizations in AR enhance the accuracy of product representations, thereby reducing returns caused by inaccurate product depictions or unrealistic expectations. And by enabling buyers to view potential purchases in their own environment, the risk of a return due to the purchase not fitting its intended space or not matching the existing color scheme is massively reduced.  

An example of 3D & AR product visualization, powered by Enhance XR

Benefits of 3D and AR for companies

Implementing 3D and AR technology in retail offers a series of benefits to both retailers and wholesalers:

1. Streamlining and circumventing the returns process

By providing customers with realistic product visualizations and customizable options through AR, retailers can reduce the number of returns. Customers can make more informed decisions, resulting in a streamlined returns process and fewer product returns overall.

2. Cost savings through optimized returns logistics

Fewer returns mean cost savings for retailers. With reduced restocking fees, reverse logistics expenses, and potential product damage associated with returns, companies can optimize their returns logistics and allocate resources more efficiently.

3. Competitive advantage in the market

Embracing 3D and AR technology gives retailers a competitive edge over companies offering similar products. By providing an immersive and personalized shopping experience, retailers differentiate themselves in the market and attract more customers, leading to increased sales and customer loyalty.

4. Reduced environmental impact

By minimizing returns through enhanced visualization and customization options, retailers can contribute to reducing the environmental impact of the retail industry. Fewer returns mean less packaging waste, transportation emissions, and product disposal, aligning with sustainable business practices.

Benefits of 3D and AR to the customer  

As well as to the retailer, the implementation of 3D and AR technology in retail brings multiple benefits to the customer:

1. Reduction of manual labor and paperwork

3D and AR technology streamlines the shopping process by reducing the need for manual paperwork and labor-intensive tasks. Customers can visualize, customize, and interact with products digitally, eliminating the traditional paperwork associated with returns or exchanges.

2. Enhanced customer satisfaction and loyalty

By providing a more immersive and engaging shopping experience, 3D and AR technology enhances customer satisfaction and therefore reduces return rates. The ability to visualize products accurately, customize options, and make informed decisions increases customer confidence and loyalty towards the brand.

3. Enhanced product or brand interaction

3D and AR technology facilitates a deeper interaction between customers and products/brands. Customers can explore product details, features, and options, fostering a stronger connection and understanding. This heightened engagement contributes to positive brand perception and a more memorable shopping experience.

4. Reduced uncertainty in online purchases

Online shopping can be accompanied by uncertainty due to the inability to physically experience products before purchase. However, 3D and AR technology mitigates this by offering realistic visualizations and customization options. This increases the incentive for customers to make online purchases, leading to higher conversion rates and sales.

Take advantage of 3D and AR today to reduce returns

Offering customers the ability to customize and visualize purchases in real time with immersive 3D and AR experiences enriches the buyer journey and offers significant tangible benefits. With proven ability to reduce return rates by up to 40%, immersive technology offers sellers the potential of significant cost savings, while also helping to cut down on unnecessary carbon emissions and boost sustainability credentials.  

To discuss how 3D and AR can cut returns for your business, talk to an expert today.

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