March 10, 2021
6 min read

Do Prices Influence Online Returns?

Do Prices Influence Online Returns?

The option of free returns is a major value proposition for online shoppers, ultimately delivering a sense of security that increases the likelihood of purchase. What’s more, free returns are now the norm, with 55% of online retailers offering them

However, returns can be costly for retailers. Processing returns results in additional expenses and logistics, from paying for shipping to managing inventory restocks for an item that may be out of season. With this in mind, retailers must weigh the ratio of returns and compare to expected profit.      

With returns now a billion-dollar business, retailers are looking to update processes to keep the cost of returns as low as possible. Average return rates vary by category, but clothing and shoes bought online typically have the highest rates with 30 to 40% returned, according to CNBC.  

To reduce their return ratio, many retailers are working to identify the reasons consumers return goods. Let’s explore a few factors, and explore opportunities for decreasing the ratio.  

What influences a consumer's purchase

Retailers are often concerned that automated pricing can increase the number of returned items. For example, they believe if an item is viewed as expensive, a shopper might come to regret their purchase.  

This is simply not true. Consumers often spend more time evaluating expensive items before buying. Products like a pair of golf clubs or a couch are rarely bought on impulse.  

On the other hand, when it comes to affordable products, shoppers might purchase more items with the intention of keeping a few and returning the rest.  

For example, we see this occurring when a shopper orders the same shirt in two sizes, with the plan of keeping the one that fits. This is especially common during COVID-19, which has resulted in an increase in online shopping and closed dressing rooms. 

Why consumers make returns

If we agree that consumers have already accepted the price of a product before clicking “checkout,” then it is only when the product has been delivered that other factors determine whether it will be returned. For example, a shopper may decide to return an item due to fit or function. Sometimes we simply aren’t sure if we want to keep a pair of pants until we’ve identified whether they work well with the shirts we own. 

With this in mind, it’s important to ensure other factors are present on your website so a shopper can make a more informed decision, which ultimately reduces the likelihood of a return. This might include incorporating customer reviews, product images or product descriptions. Sharing a few outfit examples may be just the information a shopper needs to decide whether that pair of pants work with their shirts before they make a purchase. 

How price influences purchase decisions

In the end, it’s clear that price influences the purchase decision, but not the return ratio.   

As a result, any retailer will benefit from using dynamic pricing solutions, which evaluate market conditions to display a competitive price. In this way, a shopper is more incentivized to purchase as they receive the best deal. 

With dynamic pricing, retailers can ensure that price is never the factor for a return. Dynamic Pricing by GK can streamline pricing for more intelligent, efficient, and successful pricing strategies. Are you ready to learn what GK Software can do for your business