Penelope Ody Column: Reducing the returns merry-go-round

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Consumers may expect free and easy returns – but can retailers afford the inherent cost? As many leading chains struggle to maintain profits, should they think the unthinkable?

When it comes to buying clothes online, for many the home is now the fitting room with multiple items ordered in various sizes and shades to try – and with the bulk returned, unwanted. Even worse, for a generation of younger customers wedded to Instagram – where they can never be seen wearing an outfit more than once – the answer is to wear it for the InstaPic photograph before sending it back. One recent survey by returns specialist ReBound, found that one in five of the 25-34 year olds surveyed admitted buying an item, wearing it once and then returning it for a refund: a practice which now even has its own name – “wardrobing”.

Managing the reverse logistics; processing all those returns and refunds; as well as the “secondary markets” needed to dispose of them, have all become big businesses, while the resulting costs add to current retail woes. Estimates of that cost vary with the total for handling UK returns put at £20bn each year – while some even suggest £60bn. Both numbers appear to have originated in 2016 (from a software company which folded in 2018) and have been widely quoted – but whatever the true figure may be, it is certainly pretty big.

Typical costs to pick and deliver an online order are generally put at between £3 and £10 with KPMG suggesting that it costs two or three times that to process the return. Hardly surprising then that Robert Kulawik, COO of Everything5pounds.com, has suggested that he would love a world where shoppers had no need to post goods back but simply received a refund on request, using big data to identify serial returners, and withholding this option from the unscrupulous. “This sounds drastic,” he says, “but once the cost of inbound/ processing/QA/QC losses are considered it looks better.” if the returns cost really does hit £30, then writing off anything costing less than that would be the less damaging option.

Retailers have always found ways of disposing of unwanted stock: in the past much ended up on market stalls – usually with the brand labels cut out – or went to landfill. However, following last year’s outrage at the news that Burberry had burnt more than £26m of unwanted goods to protect its brand (a practice it has since abandoned) pressure has grown for more sustainable and less wasteful options. Outlet malls – such as Bicester Village – continue to thrive, while B2B auctions are proliferating; and not just for surplus clothing.

But re-selling those returns is the final act in what can be a tortuous process. Online pundits regularly report on surveys which show that shoppers want quick and easy ways to return goods. Retailers have responded by offering courier collection, drop off parcel shops or reply paid labels to make the whole process painless. There have been opportunities, too, with logistics providers developing centralised returns processing facilities to sort out the incoming deluge.

Developing solutions is all very well, but they come at a price and given retailing’s current problems, retailers need to find new tactics for reducing returns rather than just managing them.

One of the strategies Debenhams has mooted, for example, is to encourage customers to book a fitting room when they click and collect, allowing them to try on the multiple outfits they’ve ordered so that the rejects can simply be left behind in store. Others, including Amazon, have started banning serial returners. According to a survey by IT company Brightpearl more than half of the clothing retailers and more than two-thirds of the consumer electronics specialists asked, plan to implement similar bans using AI and big data to identify offenders.

As online shopping and a multi-item approach to ordering grow, so too will that £20bn-plus cost of returns. Banning returners or writing off the sale may suit some, but what of new methods to streamline how returns are processed? Perhaps a collection facility in every shopping centre that can assess the unwanted items and then repack for re-sale, repurpose or dispose of rather than just moving them onwards around the country through a reverse supply chain?

The technology certainly exists for information about returned goods to be gathered at the point of collection and with training and suitable systems, a decision on what to do with them could be made then, rather than add yet more transport and processing costs: £20 billion – let alone £60 billion – adds up to an awful lot of product and packaging material and with awareness of the need to sustain resources and reduce waste continuing to grow, demand for more environmentally-friendly solutions may also be inevitable.

 

 

 

This article first appeared in Logistics Manager, March 2019.

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