Returns are a perennial headache for online retailers, costing US retailers $816 billion in lost sales in 2022, according to the National Retail Federation.

And the issue is gaining momentum. Asendia’s latest report, How to sell direct in the age of the conflicted shopper, found that over half of 800 global retailers surveyed (57%) felt returns volumes would increase in the next 12 months. The problem is that escalating returns rates, combined with rising transport and processing costs, are gnawing away at e-commerce retailers’ profit margins. International fashion brands including Asos, Zara, J.Crew, and Uniqlo, are moving away from free returns, rather than accepting lost profits.

Domestic returns are challenging, but the intricacies of cross-border reverse logistics are testing the mettle of even the most innovative retailers. Here are five ways that retailers with overseas customers can manage returns more cost-effectively.

1. Partnering for Global Reach and Efficiency

Collaborating with a shipping partner that boasts a robust global network can significantly enhance cross-border returns management. This partnership facilitates consolidation in key locations, reducing the risk of carrier delays, and provides a seamless experience for consumers returning items from international destinations.

A notable advantage of this approach is the potential for partners to handle tax reclamation on behalf of retailers – where doing so is commercially worthwhile - ensuring compliance with intricate international tax regulations. Managing the paperwork efficiently in both directions, and advising on the best ways to reclaim tax, should be top priorities for any US retailer’s international logistics partner.

2. Navigating the Pricing Spectrum

Introducing a fair pricing model for return shipping options can be instrumental in managing costs effectively. Transparent communication is pivotal to customer satisfaction. Additionally, retailers can seize this opportunity to educate consumers about the environmental impact of expedited international returns, fostering conscious decision-making.

3. Empowering the Customer with Enhanced Tools

By implementing size and fit tools on their website, retailers empower customers to make informed choices, reducing the likelihood of returns due to sizing issues. Technological advancements offer further promise with AI-driven personalized sizing recommendations and virtual try-on experiences.

German online retailer Zalando is piloting a virtual fitting room experience, available across 25 countries. Customers can create a 3D avatar by entering their height, weight, and gender. For a selected range of jeans, customers can see on-screen how different sizes from various brands would fit them, with a heatmap indicating where the item sits tight or loose on the avatar they created.

Meanwhile, with Google's new virtual try-on feature, users in the US can select models ranging from size XXS to 4XL, with different skin tones, body shapes and hair types. Google is using generative artificial intelligence, available through its search engine, which, to begin with, is usable on women’s tops.

4. Seamless Communication and Tracking

Streamlining communication between retailers and their overseas customers throughout the returns process is paramount, especially where timelines will be longer due to distances involved. By providing live notifications and tracking capabilities, retailers can mitigate the costly burden of customer service associated with returns.

Real-time updates on return status and anticipated refund processing times enhance transparency and trust, contributing to an overall positive customer experience. Offering “no printer required” returns will give a degree of choice and flexibility consumers really like.

5. Leverage a Purpose-Built Returns Solution

Returns of online fashion orders in the US incur an estimated $25.1 billion in processing costs for companies annually, according to Coresight Research. How can retailers see an immediate improvement in processing cost-efficiency?

One best practice is to look for returns solutions that integrate into retailers’ systems, increase speed, offer choice, and improve customer satisfaction. A logistics partner can support faster returns processing by grading and inspecting goods at strategically located returns centers. Equally, aggregation of returned items for long-distance, cost-effective returns presents another viable option.

An end-to-end returns platform will offer a comprehensive suite of services, encompassing return item assessment, refurbishment, and repackaging, ensuring a seamless and efficient returns process. Data analytics can flag costly problems. For instance, retailers can see which SKUs are being returned, which countries they're coming from, and the reasons for return. The power is in spotting the trends and taking timely action to reduce returns rates.

Technology and Partnership for Returns Success

Technology has emerged as a formidable ally in the battle against escalating returns rates. Innovative solutions, such as AI-driven sizing tools and virtual try-on experiences hold promise. However, the complexity of cross-border returns necessitates collaboration with experienced shipping partners.

In an era where consumer expectations continue to evolve, successful retailers will strike a harmonious balance between cutting-edge technology and strategic partnerships, ensuring a cost-effective and customer-centric returns ecosystem.

Helen Scurfield is Innovation and Development Director at Asendia.

This article originally appeared in the 2023 Global/Cross-Border edition of PARCEL.