The online retail industry is booming. December alone saw the UK experience an increase of 17.8% in online retail sales compared with December 2011, according to figures from the British Retail Consortium.

And with IBM research suggesting that the average shopper spent £100 per transaction over the Christmas peak, 2012 ended on a high.

However, retailers have entered the first quarter of 2013 with a bump. The influx in returns of unwanted purchases from the Christmas period almost outweighs the success experienced in late 2012.

The inability to touch, feel or try on new items combined with a legally preserved ‘cooling off period’ means return rates are much higher for online retailers than they are for bricks and mortar. Many consumers will buy multiple sizes of a garment when shopping online, as well as a variety of styles to try out before making a decision.

Add to this the obvious purchases of unwanted Christmas gifts and online return rates certainly increase.

Returns are an inevitable part of the online retail industry, and consumers have come to expect a swift, simple and above all free returns process. As a result returns can mean not only lost sales, but additional expenses.

But what can be done to rectify this issue? How can retailers stem the flow of cash from their own pockets back into the hands of their customers and preserve their bottom line?

The answer, I believe, is that online retailers need to get smarter.·      

Evaluate your returns process

A recent infographic from fortune3 suggested that 87% of consumers would be more likely to shop on a site if it had free returns.

By simplifying the returns process, retailers can look to differentiate themselves from their competitors.

It is not enough just to consider returns as an added extra to the service you provide. Instead returns must become a central tenant to any successful business strategy as their importance to the consumer increases.

Failure to do so can mean customers going elsewhere and growth faltering.

Help your customers to make better purchasing decisions

Technology is the key weapon in any online retailer’s arsenal. Yet more often than not online retailers are failing to capitalise on this. Where consumers cannot physically interact with the product, retailers must work hard to offer as accurate a picture as they can.

Augmented reality, 360 degree views, zoom, videos and extra images are all useful tools that can help give customers an improved knowledge of the product before purchasing.

Improved product descriptions and peer reviews are also vital. They can give consumers in-depth knowledge about a product, for example whether the sizing comes up big or small. Greater accuracy means it’s less likely that a product will be returned.

Data is your friend

Retailers must get better at creating a unified view between the offline and online experience. By utilising the reams of statistics at their disposal, retailers can better predict when and where returns will come.

If someone buys two identical items but in difference sizes, for example, it’s a good bet that one will be coming back. Knowing this can better enable retailers to limit the pain of returns, as they are better able to manage demand and ultimately stock levels.

Evidence from our own platform has shown that those retailers who improve their online targeting and embrace the wealth of interactive technology at their disposal have been able to reduce their return rates significantly. 

One customer in particular saw rates fall from 21% of one garment in an order in 2011, to 5% in December 2012. Retailers who follow these tips will not be guaranteed a return free existence, but the pain associated with the problem will be greatly reduced.