Returns are Rising Fast — and Not Enough Tools are Focused on Stopping Them at the Source

The average return rate in eCommerce is estimated at 17.6% for 2024. Nearly 1 in 5 products sold was returned. There are many factors affecting this high number, including the two opposing trends that I will elaborate on in this article. The first is the increase in the number of products and alternatives offered by online retailers. The second is the lowering of payment and return thresholds. Both factors impact the psychological decision making of us as consumers, and in doing so are partly responsible for the global ‘return pile’. But can we use the same psychological and marketing principles to reverse this trend? With this article, in addition to exploring these two trends, I try to take a positive look at how online providers can become part of the solution.

The ever-expanding product catalog

There are now more online stores and products globally than ever before. The barriers to entry for starting online businesses have dropped tremendously over the past 10 years. Take Shopify for example, it charges €1 for the first 3 months of running your online store. One. Euro. Along with other global trends such as dropshipping, the number of online stores has skyrocketed. And that's a great trend for consumers, right? All those extra products and stores to choose from, that will help us choose the perfect product for our specific situation. Unfortunately, that is not the reality. All those extra products and brands do not help us make decisions that make us more satisfied. On the contrary, the opposite is itself the case. “Decision fatigue” is a long-studied phenomenon, including in eCommerce:

Research shows that consumers are up to 10 times more likely to make a confident decision when presented with fewer options. This highlights the undeniable impact of the overload of choices when making decisions.

In our family, we have renamed this phenomenon “the vacuum cleaner's dilemma.” Referring to my father's extensive search for the right vacuum cleaner. With a cord? Without cord? With bag? Without bag? Integrated dust buster? Or is that a waste of the dust buster still in the closet? How important is weight? Battery life? Collection capacity? ...

Adding more products or alternatives to choose from not only impairs our ability to decide. It even reduces how satisfied we are with the purchase we made. This is due to the increase in the number of trade-offs (trade-offs) we have to make when choosing a product or product category. The more trade-offs we have to make, the more we become aware of the shortcomings of our chosen product and the advantages of the alternatives we could have chosen. This reduces our satisfaction with the product we chose. Combined with lower thresholds for returns and payment, returning the purchase is a very small step.

Lowering the barriers to payment and returns

Now that we know that the increase in product and brand alternatives comes at the expense of our satisfaction with the product eventually delivered to our doorstep, why do we buy it anyway? One reason can be found in the lowering of barriers to making online payments and return options for online purchases. Payment providers like Klarna play well on psychological mechanisms like “the pain of paying.” These strategies are very successful (if success is measured by the number of products sold) because they exploit our psychological and biological mechanisms. B.J. Fogg, professor of psychology and researcher at Stanford University, discovered this back in 2009. Behavior occurs when someone is motivated to do something (e.g., make a purchase) and when the barriers to performing that behavior are low. Online marketers have been applying this for years. They know how to “trigger” behavior online, increasing the likelihood that buyers will make a purchase. Just when we begin to doubt our decision, we come across a flashy text that reassures us: “Buy now, pay later” or “Return free within 30 days. Ah, what a relief…

If we do not make the right decision, if we are not satisfied with our new AirFryer, iPhone case or even a new car, we can return it without worry. All the barriers that once stood between us and the purchase are gone. This trend, combined with our tendency to be less satisfied with what we buy, has a big part in why we return our newly purchased items just as easily.

Becoming part of the solution: helping consumers make better decisions.

Online stores can help people feel happier with their own purchase, or in more commercial terms: increase the perceived value of a purchase. This can reduce the likelihood that people will effortlessly return a purchase. How can we increase this perceived value?

First, by helping consumers decide which product to choose and not overloading them with all the hundreds of products and alternatives the Web shop offers. Web stores need to work on their ability to give consumers product advice so they know they are making the right decision. There are already tools available to help you do this. This principle is known as “guided selling”, which involves asking questions about the buyer's individual situation, preferences and intended use of the product. Based on their answers, a product that meets their needs is recommended. This approach eliminates the need for endless product comparisons.

Another way to increase the perceived value of a purchase is to make it feel “theirs.” This is due to a phenomenon called the “endowment effect.” This is a psychological bias that causes us to place a higher value on things we own, as opposed to things we don't own. This is one reason why physical technology stores often have showrooms where you can just grab a phone and try it out. This increases the feeling that the product is “yours,” and thus the psychological price tag you attach to it.

There is a good chance that using psychological principles to increase the perceived value of products can help reduce returns. Currently, 1 in 5 products sold that are returned is excessive. This problem also requires a change in mindset among online retailers. They really need to ask themselves if the product they are selling is a perfect fit for their customers. By doing this, we can improve buyers' online decision-making and collectively contribute to improving global e-commerce.