Home
/
Insights
/
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

Vickie Scullard

|

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 2021, customers returned merchandise valued at $428 billion, accounting for 10.6% 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 impact on commerce loss.

Try out your own augmented reality (AR) experience now

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.  

Typical returns policies  

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.  

Returned items should be in their original condition, unworn, undamaged, and free from alterations, accompanied by their original packaging, including tags, labels, and accessories.

Products should be unused or unaltered before returning, while certain sale or discounted items may be deemed final sale and ineligible for returns. Finally, it's important to provide a valid receipt or proof of purchase when initiating a return.  

Reasons for customer returns

Items are returned to retailers for a number of reasons, some of which are not the fault of the customer, while 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 for the right size or refunds. The fast fashion culture contributes to returns as impulse purchases don't always meet expectations.  

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 achieved, 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 through our AR platform.

Read more: Everything you need to know about e-commerce returns

Problems with returns

Returns pose various challenges and implications for retailers, such as financial loss due to processing costs and potential 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 also must be considered. The fact is, returns create a giant 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

Return rates in 2022 were roughly 14% higher than in 2019.  

The return rate of 11% in 2020 marked a substantial 70% increase from the previous year. Furthermore, in 2021, this percentage doubled to reach 22%. These figures highlight the growing importance of managing returns effectively in the fashion business.

The expense associated with returns includes shipping fees, processing costs, and potential restocking fees, which can significantly impact a company's profitability.  

In recent years, the rise in online returns has become a costly issue for retailers. In 2021, it was estimated that online returns alone accounted for $218 billion.

As a result, retailers are exploring strategies to mitigate return costs, such as offering free return shipping or 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.  

Retailers may also 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 charge for return shipping to discourage non-defective returns, offset processing costs, and promote careful consideration of purchases. However, such measures could risk losing customers to competitors.  

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

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

Powerful AR product visualizations

3D/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.

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

Bridging the gap between online and in-store shopping

One challenge of online shopping 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. This enhanced virtual experience enhances customer confidence in their purchase decisions, reducing the need for returns driven by uncertainty.

Enhanced online shopping experience

With 3D/AR technology, retailers can 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 might appear in different colors or configurations.  

3D product configurators  

AR product configurators have several benefits in reducing returns and addressing customer dissatisfaction with product variations or options.

AR configurators enable customers to choose colors, materials, or features to see the changes in real-time. This interactive experience allows customers to visualize the final product before making a purchase decision, reducing the chances of dissatisfaction or mismatched expectations.

Additionally, by using AR configurators, customers can explore and experiment with different product variations or options, such as size, style, or other configurations.  

Read more: A complete guide to building 3D interactive product models for e-commerce

Realistic product visualization in AR  

Realistic product visualization in AR enhances the accuracy of product representations, thereby reducing returns caused by inaccurate product depictions.  

AR technology allows virtual objects to be seamlessly integrated into a user's environment through a smartphone or AR device, so a piece of furniture, such as a sofa, can be seen in its desired place without the need for a tape measure.

This minimizes the risk of returns due to discrepancies between customers' expectations and the actual appearance or fit of the product.  

Benefits of 3D/AR to the company  

Implementing 3D/AR technology in retail offers various benefits to both retailers and wholesalers.

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.

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.

Competitive advantage in the market

Embracing 3D/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.

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.

Read more: 7 marketing strategies IKEA uses to increase online conversions

Benefits of 3D/AR to the customer  

As well as to the retailer, the implementation of 3D/AR technology in retail brings several benefits to the customer.

Reduction of manual labor and paperwork

3D/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.

Enhanced customer satisfaction and loyalty

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

Enhanced product or brand interaction

3D/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.

Reduced uncertainty in online purchases

Online shopping can be accompanied by uncertainty due to the inability to physically experience products before purchase. However, 3D/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/AR today and reduce returns

Adding Enhance’s 3D/AR software to your website will significantly simplify the buying and selling process while generating immersive commerce experiences in under 30 seconds.

  • Create, deploy, and track 3D and AR product experiences effortlessly
  • Generate captivating commerce experiences in seconds, without coding
  • Customize visuals at any scale by integrating 3D viewers into channels
  • Manage models in a centralized library, deploy immersive experiences
  • Toggle features like annotations, configurations, lighting, and more
  • Control, monitor, and gain insights from a single platform
Get started here.  

Subscribe to our newsletter

Receive weekly updates on new posts and features
Join the newsletter

Ready to boost sales with immersive product experiences?

Request a Demo

Send us your enquiry and our team will get in touch for further details as soon as possible

* Compulsory fields

Please enter a valid business email address
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.