E-commerce platforms are rushing to "return 50 million items every day", but is this what we want?

In the prospectus recently submitted by express locker operator Fengchao, a set of data hidden in it is very eye-catching, and it also reveals something that e-commerce platforms avoid talking about but happens more frequently every day: "From 2019 to 2023, the compound annual growth rate of e-commerce reverse shipments in China's express delivery industry The growth rate is 22.7%, and the compound annual growth rate from 2023 to 2028 is expected to be 20.7%. In terms of scale, the scale of e-commerce reverse parts was 3.6 billion in 2023, and is expected to grow to 20.9 billion in 2028.”

In direct conversion, that is, more than 20 million items are returned or exchanged every day today. Four years later, 50 million items are returned or exchanged every day, and more than 100 million items are returned or exchanged every two days.

Since the beginning of this year, the topic of e-commerce returns has frequently been on the hot searches. For example, "the return rate of women's clothing is as high as 80%", which surprises ordinary people. Consumers get the vague impression that return rates are becoming higher and higher. However, e-commerce platforms are often unclear about this.

However, as a widely involved industry, the secrets of the e-commerce industry have other perspectives that can be observed. If you sort out the data on the express delivery and merchant side, it will be clear that the scale and growth rate of e-commerce returns exceed many people's expectations.

This reflects the convenience of returns brought by e-commerce platforms’ optimized shopping experience. However, for consumers, this convenience is not entirely beneficial; for merchants, many people are already complaining; for e-commerce platforms, the high return rate seems to be an anti-commercial phenomenon - technology is advancing and e-commerce formats are maturing, so why are there more and more returns?

It’s worth taking a closer look at the current return situation of e-commerce companies.

Returns are easier than regulations

"Now you can return it at will, even if it is worn out." A merchant complained about an e-commerce company's seven-day no-reason return policy, and many colleagues praised it.

"Seven days of no-reason returns" is a window into the difficulty of returns on various platforms. The "Interim Measures for the Seven-Day No-Excuse Return of Goods Purchased Online" was released on March 15, 2017. On this basis, each e-commerce platform has formulated its own return rules.

Generally, the platform will first clarify which categories of products are not eligible for "seven-day no-reason returns", and then clarify which categories of products can optionally support "seven-day no-reason returns". In addition, all other products can be "seven-day no-reason returns".

We did some combing through the mainstream e-commerce platforms and found that, at least on the surface, Taobao has the most detailed regulations. Douyin and Kuaishou have similar regulations. JD.com has the most categories where "seven days without reason returns" is not applicable, and Pinduoduo has the least categories where it is not applicable.

In other words, Pinduoduo probably has the lowest return threshold, while JD.com may have the highest threshold.

Generally speaking, based on the categories that clearly do not support and do not apply to "seven-day no-reason returns", Pinduoduo only involves virtual goods other than shopping cards, gift cards, vouchers, and game software, while Kuaishou includes five major categories including "customized and custom-made goods." Douyin added "Human Medicine" to Kuaishou, while Taobao added "Personal Idle Items" and "Second-hand and Bidding Goods" to Douyin.

JD.com does not support the widest range of returns within seven days without any reason. Jingdong also does not support seven-day no-reason returns for "goods that may affect personal safety or life and health after being unpacked, or that may easily cause changes in the quality of the goods after being unpacked", "goods that have a greater depreciation in value after activation or trial use", "goods that are near the shelf life or defective goods that have been clearly stated at the time of sale".

The information comes from the official websites of each platform. Cartography: Silicon Stars.

"Seven-day no-reason returns" is a protection for consumers' rights and interests, and making a detailed distinction between whether products are applicable to this rule can protect the interests of merchants. However, in the view of some merchants, e-commerce returns may not be handled in accordance with the rules. It’s not that the platform will restrict consumers’ returns and make returns more difficult. Instead, the rules are ignored to make returns easier.

Returns are becoming more and more convenient.

"In the past, the return rate was less than 5% for 1,000 orders a day. Now, for less than 100 orders a day, the return rate exceeds 30%." Although the return rates of different categories of goods vary greatly, the problem of rising return rates is common among merchants.

An apparel merchant on a live streaming platform told Silicon Star that its store return rate increased by ten points this year, exceeding 85% overall. Another women's clothing merchant on the same platform said that the return rate of live broadcast platforms is much higher than that of traditional e-commerce platforms, and no matter how the quality is controlled, the return rate is about 60%.

Data from Semir Clothing shows that in 2020, the return rate on its Tmall platform was 31%; in the first half of this year, the return rate on Tmall rose to 62%.

According to the communication minutes of a leading down jacket brand circulated on the Internet last November, the return rate of its Tmall flagship store was originally within 20%, but now it reaches 40%, and the return rate of Douyin reaches 65% to 70%.

Reverse logistics is on the rise

Some are happy and some are sad.

The rising return rate has troubled merchants, but it has brought new development opportunities to the express delivery industry. At the same time, from the express delivery industry, we can have a clearer understanding of the overall return situation in the e-commerce industry.

Reverse logistics is one of the current business priorities of the express delivery industry. Jitu said earlier that the company’s proportion of reverse logistics parts has been increasing. In ZTO Express’ first half report, “reverse logistics services” were newly added to the core express business scope. Fengchao rushed to be listed on the Hong Kong stock market at the end of August. Its prospectus disclosed that the new trend in the e-commerce industry has brought huge market opportunities for reverse logistics...

The so-called "reverse logistics" refers to the logistics service of transporting goods from consumers back to e-commerce platform merchants, usually for returns or exchanges. In other words, through the development of reverse logistics, we can get a glimpse of the return situation in today's e-commerce format.

Specifically, express parcels can be divided into three categories: e-commerce forward packages, e-commerce reverse packages, and loose packages. Among them, the forward package is the package sent by the merchant to the consumer, and the reverse package corresponds to the reverse logistics, which is the package sent from the consumer back to the merchant.

The data released by Fengchao mentioned at the beginning of the article, 20 million, 50 million, and 100 million, are each surprising. It’s always hard to imagine a future where “more than 100 million items will be returned or exchanged every two days” four years from now.

Market size of China's express delivery industry by package type. Source: Fengchao prospectus

For express delivery and logistics companies, this is undoubtedly a considerable market. Reverse software has become the focus of competition.

SF Express will achieve revenue of 258.4 billion yuan in 2023. One of its key initiatives is to tap the e-commerce returns market through services such as door-to-door collection within one hour. In the first half of this year, SF Express further consolidated its position in the returns market by simplifying operating procedures and offering preferential pricing. In some e-commerce platforms, their share has accounted for 70% to 90% of the returned items distributed by the platform.

The reverseware business directly promotes Jitu’s development in China. Jitu turned a profit in the first half of the year, with business volume in China increasing by 37.1% year-on-year, and single-ticket revenue remaining stable despite intensifying industry competition. Its executives revealed that the business volume of reverse parts and bulk orders doubled year-on-year, which contributed to this. At present, Jitu is also striving for more returns and loose orders by promoting automated equipment and driverless vehicles.

In addition, STO pointed out in its first-half report that the company has undertaken reverse returns from multiple mainstream e-commerce platforms. According to Kuaibao.com, ZTO and Yunda have successively won the Douyin return business in multiple cities.

Fengchao, which provides terminal logistics solutions, has directly benefited from reverse logistics. In the past four years, the compound annual growth rate of e-commerce reverse mail in terminal shipments has reached 66.5%, and will maintain a high growth rate in the next few years, providing support for Fengchao's development.

In summary, the rising return rate has become an important driving force for the growth of the express delivery industry.

The return rate is likely to continue to rise

The express delivery industry has been put on the fast track by the booming development of e-commerce, but the progress of the two is not exactly the same. The rise of reverse logistics has proved that the return rate of e-commerce has increased, but what deserves more attention is the comparison between the growth of reverse logistics and forward logistics.

From 2019 to 2023, the compound annual growth rate of e-commerce reverse software is 22.7%, which has exceeded forward software by two percentage points. From 2023 to 2028, the compound annual growth rate of e-commerce forward parts is expected to decrease to 11.2%, while the compound annual growth rate of reverse parts will remain at 20.7%. This means that for the entire e-commerce format, the return rate may increase significantly.

Merchants will have even more headaches.

Behind this, on the one hand, is the saturation of the market and the intensification of competition among e-commerce platforms. As the domestic e-commerce market enters the stage of stock competition, service-related consumer experience is paid more attention by the platform, and return service is an important indicator that directly affects consumers' shopping decisions.

Relevant research points out that whether in the purchase stage or the return stage, the more relaxed the return policy is, the more obvious the positive impact on purchase intention will be. The rise of Pinduoduo is related to this. In addition to relying on tens of billions of subsidies and low prices, convenient returns and refunds are a major advantage of Pinduoduo to attract consumers.

On the other hand, the interest in e-commerce driven by live broadcast platforms has made shopping decisions more casual, and has also driven the return rate higher. As summarized by the express delivery industry: e-commerce has ushered in the boom of live streaming and short video delivery models. The trend of impromptu consumption has greatly promoted the surge in product sales, and correspondingly increased the demand for returns and exchanges.

According to the "2020 China Livestreaming E-commerce Industry Research Report" released earlier by 36Kr Research Institute, the average return rate of livestreaming e-commerce is 30% to 50%, which is higher than the 10% to 15% return rate of traditional e-commerce and 2 to 3 times the return rate of the brand's official e-commerce sales channel.