Return Trends 2024: What Matters Now in E-Commerce
While predicting our personal development for 2024 might be challenging, forecasting online commerce trends is a different story. Therefore, let's welcome the new year with an outlook. We'll examine current challenges that will shape the upcoming year from both the perspectives of customers and online retailers.
Our values are constantly evolving, and the same goes for how we inform ourselves online, how we (want to) shop, and what we expect from a return. Brands and retailers are challenged to precisely understand and anticipate the needs of their customers to remain profitable and relevant in the dynamic environment of the e-commerce industry.
The outlook in numbers is promising, as the coming years are set to witness a veritable online shopping boom. In 2023, e-commerce revenue was estimated at over 122 billion euros in Germany alone. By 2027, experts even project an increase to over 167 billion euros.1 Let's now unveil the trends that will shape this curve:
1. Hyperpersonalization: Artificial Intelligence (AI) Makes It Possible
If AI were to be the word of the year for 2023, it wouldn't be surprising. Generative AI, which can recreate content such as images, texts, or other media, has long found its way into the daily lives of many. AI does more than answering questions and creating colorful images. Consider Spotify Wrapped, an annual presentation of users' listening history in a colorful package of statistics on their most-played songs, genres, and artists. Spotify Wrapped is the epitome of hyperpersonalization and has become inseparable from social media trends around the Christmas season.
Online shops are also increasingly relying on AI and Machine Learning (ML) to provide personalized recommendations to their customers. According to a report by Forrester, Millennials and Gen Z constitute 64 percent of today's customer base. Their demand is for a shopping experience that reflects their individual shopping behavior. According to Forrester, this demographic expects online shopping – whether private or business-related – to be more than just a transaction. It should be intuitive and seamless when it comes to shopping, returns, or searching for information on the website.2,3 Recommendation systems will become more precise and relevant for customers in the new year thanks to AI algorithms.4
Smart Use of Data
A crucial use case for artificial intelligence in e-commerce is predicting the purchase cycle. When is the next likely purchase time for a customer? How will the shopping cart size evolve? AI algorithms can already answer these questions precisely. Even the probability of a return can be calculated based on historical data on purchasing behavior.5 These insights offer significant potential for retailers to make their marketing communication more effective at the right time and with the right content.
Adrian Piegsa, founder and CEO of tante-e, one of the leading Shopify Plus agencies in the German-speaking region, emphasizes the importance of using data to personalize shops for customers. According to Piegsa, the correct selection of Shopify apps and the tool stack will be particularly relevant for Shopify users in 2024. Only with the right apps that communicate and exchange data can online shops create a personalized customer experience. This, in turn, allows shops to further increase their retention and profitability – goals that, according to Piegsa, will continue to be of maximum relevance and focus for online shops in 2024.
2. Sustainability: Here to Stay
For the Business Sustainability Index in 2023, US consumers were asked whether the sustainability of a product influences their purchasing decision. The result: 74 percent emphasize that they consider the ecological footprint of a product important – and would even spend more for it.6
Return management is now being made more sustainable by many brands. Online shops are increasingly using eco-friendly packaging or adopting a digital, paperless return process to save time and money. The importance of the option of a paperless return is evident in the fact that having a personal printer is no longer a given. A survey among younger online shoppers shows that almost half of the respondents do not have regular access to a printer.7
Returns are no longer seen as waste but as a resource that can be cleverly utilized. With an automated return process, returned goods can be donated, repaired, or sent back to the warehouse directly.
Another sustainability trend that will accompany us in the new year is the growing second-use market. More than four million used or refurbished products were sold through Amazon in 2023. Used goods in Europe and the UK have now reached a volume of 1.15 billion euros, and by 2026, the revenue is expected to grow to 6 billion euros.8 According to PwC's Global Consumer Insights Survey, 56 percent of consumers in Germany have already bought used clothing. However, the driving force will continue to be Gen Z, with two-thirds of them having already purchased second-hand items. Online selling platforms are particularly popular for clothing, especially luxury brands, as well as furniture and electronics.9
3. Transparency and Communication = Smooth User Journey
In 2024, online shops will be measured by how transparently they communicate their policies. Unclear or hidden return policies lead to misunderstandings that pose significant obstacles in the user journey. Clear, understandable information about the product and the return process should be easy to find to build trust and strengthen brand loyalty.
Brands and online shops should always take the customer perspective and view the user journey as a holistic experience. While we are delighted when we find exactly what we are looking for during online shopping, if we futilely search for information on the return process during checkout, it will have a negative impact on the overall experience. And this affects many shoppers. According to a survey, 90 percent of younger and 71 percent of older customers are dissatisfied with at least one aspect of their shopping experience.2
How and where the right information should be found also depends on the target audience. Millennials and Gen Z shoppers are among the active information seekers. While similar behaviors are shown across all age groups, younger generations are more willing to use other sources and find information from third parties, such as customer reviews, even more helpful than information from retailer sites.2
4. Instant Refunds, Store Credit, or Paid Return: Goodbye to "One Size Fits All"
In 2024, we expect more and more brands and online shops to tailor their return processes individually to their own needs and those of their customers. Smartly managing returns is a crucial task, as retailers on average have to spend between five and ten euros for a return, according to a survey by the EHI Retail Institute.10
Depending on the value of the goods and the region of a customer, retailers like Amazon have already begun to restrict free returns.11,12 At this point, however, the cat bites its tail because the options offered for a return are crucial for customers. In a survey, half of all online shoppers said they had already abandoned their shopping carts because the most practical return option for them was not offered.
We believe that in the future, shops will offer diverse and individual options for returns. Some e-commerce companies will align themselves with Amazon, while others will opt for alternatives such as Instant Refunds. Instead of waiting for days for the return to be processed, customers receive their money immediately after initiating a return with Instant Refunds.
Store credit is also becoming more common. In this case, customers receive the value of the goods as a voucher. This can motivate them to shop again in the same online store, using their store credit, thereby fostering customer loyalty.
Our recommendation: With automated return software, brands can offer multiple return options on one platform and, through return rules, provide the options that are most important to their customers.
Overall, 2024 promises to be exciting! More personalization for customers and shops, sustainability, AI, and transparent communication take center stage. In conclusion, we can say that the future of online shopping will not only be more convenient but also more environmentally friendly and customer-friendly. We are excited to be part of it.