An increasing number of retailers are choosing to close their physical stores. A recent article reveals that more than 800 stores will be closing across the U.S. in 2023, including major retail chains like Amazon, Bath & Body Works, Macy's, Walmart, and Big Lots. Store closures represent a significant challenge to retailers that have already been struggling to adapt to the changing retail landscape. There are several reasons why retailers are closing brick-and-mortar stores:

• Increased competition from online retailers: In 2022, total eCommerce sales were estimated at $1.03 billion, an increase of 7.7 percent from 2021. This growing sector puts pressure on brick-and-mortar retailers to rationalize their physical retail footprint.

• Changing consumer habits: Consumers are increasingly shopping in new ways, such as using mobile devices, which has made it easier to compare prices, suggest items, and purchase goods from anywhere. Social shopping is expected to swell to nearly $80 billion by 2025, and make up 5 percent of total U.S. e-commerce.

• High operating costs: Maintaining physical retail stores can be expensive, especially as rents and wages continue to rise. Retail rents increased by over 3.9 percent from mid-2021 through mid-2022 - the highest they have ever been. By closing stores, retailers can reduce their operating costs and allocate resources to other areas of their business.

• Poor store performance: Some brick-and-mortar stores simply aren't performing well due to factors such as location, competition, and changing consumer preferences. In these cases, retailers may choose to close underperforming stores and invest more in profitable locations.

Impact on the Customer 

While this trend may be good news for retailers looking to cut costs and improve their bottom line, it can have significant ripple effects for consumers. As the economy recovers and consumers become more comfortable returning to physical stores, retailers that have closed stores may find themselves at a disadvantage. For sales, brick-and-mortar retail stores offer unique advantages such as the ability to see and touch products, immediate gratification, customer service and a personalized shopping experience. For returns, it is more beneficial for a consumer to return an item to the store instead of online for several reasons:

• Positive Customer Experience: When a customer returns an item to a physical store, it provides an opportunity for the retailer to interact with the customer face-to-face, potentially resolving any issues and creating a positive customer experience. This can lead to increased customer loyalty and repeat business, in fact, 96 percent of customers will buy again from a business that offers an “easy” or “very easy” return experience.

• Speed and Ease: In-store returns can result in a faster and more efficient return process, with the customer receiving a refund or exchange on the spot. An instant refund is among the top returns priority for consumers, with 39 percent telling goTRG they expect their refund within 24-hours.

• Reduced Costs: The high cost of processing e-commerce returns is a major challenge for retailers. In addition to the expense of shipping and handling, retailers must also process returned items, restock them, and sometimes dispose of them. This can be a time-consuming and expensive process, with many returns resulting in a total net loss for retailers. In-store returns can help retailers avoid shipping, labor, and restocking fees associated with online returns. 

• Incremental Sales and Exchanges: In-store returns can drive additional sales, as customers who come to return an item may end up making additional purchases while they are in the store. In fact, 77 percent of shoppers say they’re more likely to purchase other items when returning or exchanging in physical retail stores. What’s more, 20 percent said they spent more on new purchases than on the original unwanted item.

• Fraud Prevention: For every $100 in returned merchandise accepted, retailers lose $10.40 to return fraud. Physically receiving an item from a customer helps verify that the returned item is in fact the one that was purchased thereby reducing instances of fraud, which can be more difficult to detect in an e-commerce environment. 

In addition to these customer-facing impacts, store closures can also have broader economic and social impacts. When a store closes, it can lead to job losses for employees who worked atand supported the store. This can have a ripple effect on the local economy, as those employees may be less likely to spend money at other local businesses. In some cases, store closures can even contribute to the decline of entire neighborhoods or commercial areas.

Where to go Next?

So, how can retailers continue to encourage in-store returns in the face of store closures? One potential solution is to partner with other retailers to offer consolidated returns drop-off points. By working together, retailers can create a network of convenient returns locations that are easily accessible to customers.

For example, a customer who needs to return an item purchased from a clothing retailer could drop off their item at a participating grocery store or drugstore where consumers visit frequently. This would allow the clothing retailer to save money on shipping and handling fees while also offering the consumer a convenient returns option.

The benefits of consolidated returns drop off points extend beyond cost savings. By working together, retailers can offer customers a more seamless returns experience. Instead of having to navigate multiple returns processes, customers could simply drop off their items at a single location. This could help to reduce confusion and ultimately lead to higher customer satisfaction and loyalty.

Of course, there are some challenges associated with implementing a consolidated returns drop off network. Retailers would need to agree on the terms of the partnership, including how returns would be processed and who would be responsible for handling the items. They would also need to invest in the necessary infrastructure, such as signage and technology, to ensure that customers are aware of the program and can easily drop off their items.

Despite these challenges, the potential benefits of a consolidated returns drop off point network are significant. By working together, retailers can reduce the high cost of processing e-commerce returns while also offering customers a convenient and seamless returns experience. As the retail industry continues to evolve, it will be important for retailers to explore innovative solutions like this to remain competitive and meet the changing needs of their customers.

Ultimately, the closure of physical stores is a complex issue with far-reaching effects throughout the retail supply chain. While retailers may benefit from reduced overhead costs and expanded market reach, they must also be prepared to manage the challenges that come with fewer locations. This includes developing new strategies for managing in-store returns at surviving stores, investing in new technology and infrastructure to streamline the returns process, and even partnering with unlikely allies to provide a seamless and personalized service to customers, even in the absence of physical stores.