Fast deliveries and easy returns are key for retailers

With Prime Day coming to an end on Wednesday evening, online retailers large and small are taking advantage of Amazon’s biggest summer sale and seeing a boost in profits.

But increased product promotions and discounted sales aren’t just handed to e-commerce companies on a silver platter. Those who benefit most from the big sale had to do their homework and prepare their logistics to handle the large influx of orders.

It all comes down to customer satisfaction, which requires, among other things, fast deliveries and a simple returns policy.

Customer Returns and Experiences

Kristen Kelly is vice president of product at Loop Returns, a returns software company based in Columbus, Ohio. She says retailers start planning for Prime Day well before the actual sales start, and slowdowns are to be expected.

“We’re seeing logistics impacts even before (Prime Day),” Kelly told FreightWaves in a virtual interview. “As Amazon ramps up their inventory and fulfillment, you’re going to see congestion in their warehouses because they’re trying to get all that stuff in there. So merchants who could use Amazon’s fulfillment services or warehouses are already seeing slowdowns in the days leading up to that event.”

Kelly said it’s difficult to hire more workers to help run things more efficiently during Prime Day compared to other holiday sales that can last several months. Because it’s such a short period of time for this sale, it doesn’t justify hiring new workers compared to hiring part-time workers for holiday sales in late November or December.

While there is little that retailers can do to speed up order fulfillment during this time, one way they can prepare for Prime Day is to provide customers with a simple and easy returns process.

First, that requires a solid return policy. Most companies outline those policies up front when selling goods online. Kelly said returns policies vary by retailer.

“It really depends on the behavior that they’re trying to encourage with these customers,” Kelly said. “You’ll see that someone who really wants the exchange to happen might offer a free exchange, whereas they might charge a fee for a refund.”

Merchandise and shipping costs are also a factor when choosing a return option, and the rise of returns fraud may be one of the biggest challenges facing retailers.

“Returns fraud and abuse have definitely increased over the last few years,” Kelly said. “It used to be that most retailers had a provision in their returns policy that once the item was scanned at the carrier, they would issue a refund. That was long before the item was returned to the warehouse.”

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Some clients do this really well.

“Warehouses started receiving a box of rocks or a can of soup,” Kelly said. “Yes, the label was scanned and (customers) got their money, but then (merchants) were left without that item. We’re seeing more and more merchants moving to a method where they have to actually pick up the item at the warehouse and inspect it before they can make a return. Or implementing something like a boxless, labelless drop-off point where someone actually physically takes the item and confirms that it’s the right SKU and the right quantity before they can make the return.”

She added that Amazon has an advantage over other retailers in the fight against fraud because it can close down fraudsters’ accounts.

Her advice to retailers is to clearly communicate the returns process to customers.

“There’s nothing more frustrating for a customer than thinking they understand a returns policy and then being surprised,” Kelly said. “We’re also seeing returns cost retailers a lot of money, from return shipping costs to warehouse processing to eventual refurbishment. We’re also seeing customers tolerate the fees that retailers charge, so retailers should look for ways to save money by passing some of the costs on to consumers.”

Kelly said 60% of Loop Returns merchants currently charge fees for returns and exchanges, and consumers are willing to pay for it.

“They should also think about returns as part of the customer experience,” Kelly said. “If a customer has a bad return experience, that has an impact on whether they’ll come back and shop with that brand. So you have to look at things that are convenient for them, cost-effective for them and cost-effective for the retailer.”

DHL considers e-commerce

Other major challenges retailers face during this time include higher shipping costs and inflation.

Online retailers have high hopes despite some challenges, according to the 2024 e-commerce study by Bonn, Germany-based logistics company DHL. The study finds that 40% of respondents see shipping costs as the biggest threat to their business, while 38% cite inflation as their top challenge.

“While shipping costs are certainly an issue, we are also seeing speed and quality becoming more important relative to cost,” Lexi Lopez, DHL’s point person, said in an emailed statement to FreightWaves. “This shift can be attributed to online retailers looking to expand their business this year and their increased focus on time-definite delivery options.”

Additionally, 65% of respondents said the U.S. presidential candidates’ stance on international trade would influence their vote, with 23% fully agreeing.

“This highlights the importance of international trade policy in shaping the business environment as e-commerce companies seek to navigate and capitalize on global market opportunities,” Lopez said. “The focus on trade views underscores the interconnectedness of policy and business strategies in the current economic climate.”

In the previous election in 2020, 78% of respondents said the U.S. presidential candidates’ views on international trade would influence how they voted in the election year.

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