Free Shipping, Lenient Return Policies, Rampant Returns; UPS Expects 15% Jump in Returns; Reflections on Retailer Wages

It's no secret that online shopping is soaring. From a customer standpoint, what's not to like about the shop-at-home, no gasoline, no sales tax, low-price-guarantee, and lenient return policy model of online retailers?

For those who know what they want, as well as those willing to wait a couple days to get it once they find it, the answer is nothing.

And as sales (or alleged sales) increase, so do returns. This has sellers sending emails that suggest clothing sizes based on return history, hoping to break return habits.

UPS Expects 15% Jump in Returns

Please consider Rampant Returns Plague E-Retailers

Behind the uptick in e-commerce is a little known secret: As much as a third of all Internet sales gets returned, according to retail consultancy Kurt Salmon. And the tide of goods flowing back to retailers is rising. Shipper United Parcel Service Inc. UPS +0.15% expects returns to jump 15% this season from last year, making them a significant and growing cost for retailers.

The stakes get even higher during the holidays, when return volume peaks. So this year, chains are digging through past transactions to weed out chronic returners, train shoppers to make better decisions or stem buyer's remorse.

Fashion discounter Rue La La, owned by Kynetic LLC, is testing a program that gives customers access to their own purchasing history, and also access to sizing data across its customer base, to help them make better purchases the first time around.

For instance, a customer who has continuously bought the same brand of dress shirts in both a small and a medium might see a note pop up saying: "Are you sure you want to order the small? The last five times you ordered both sizes, you only kept the medium," Chief Executive Steve Davis said.

The biggest cause of returns is size. To help shoppers choose better sizes, Macy's Inc. and Nordstrom Inc. JWN +1.58% are working with analytics startups such as True Fit Corp. that crunch data to show customers how clothes and shoes will fit them in real life. The companies match up garment specifications and other data from retailers with information provided by shoppers about their favorite clothing items, to generate sizing and fit recommendations.

Retailers are zeroing in on high-frequency returners like Paula Cuneo, a 54-year-old teacher in Ashland, Mass., who recently ordered 10 pairs of corduroy pants in varying sizes and colors on Gap Inc. GPS +0.73% 's website, only to return seven of them. Ms. Cuneo is shopping online for Christmas gifts this year, ordering coats and shoes in a range of sizes and colors. She will let her four children choose the items they want—and return the rest.

Reflections on Wages

That stores can take a huge jump in returns and still make a profit says a lot about the viability and cost pressures on the store-front model with greeters, retail clerks, sales associates and floor assistance.

It also says a lot about why wages are where they are.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com