Pricey platitude

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It has become a platitude to say that returns are a problem for retailers – particularly with the growth of online shopping. But the problem is costing retailers some $642.6 billion (£409bn) globally.

Malory Davies FCILT, Editor.

Malory Davies FCILT, Editor.

And a new report by retail analysts IHL Group for OrderDynamics, suggests that much of that cost could be prevented. The study, Retailers and the Ghost Economy: The Haunting of Returns, analyses the causes and financial impact of merchandise returns. It found that quality problems or product defects are the leading cause of retail returns and account for $162bn (£103bn) in returns worldwide – that is 1.1 per cent of total retail sales worldwide.

Sizing issues plague the retail apparel market, with more than $62bn (£39bn) in global returns.

All together, it found that up to half of all retail returns are at least partially preventable. Some $334bn (£213bn) of returns are due to defects/quality, wrong sizing, the product didn’t match the online description, late shipment or the customer purchasing the wrong item.

IHL’s leading causes of retail returns:

Defective/poor quality: $162.0bn (£103bn)

Bought wrong item: $99.3bn (£63bn)

Buyer’s remorse: $88.7bn (£56bn)

Better price elsewhere: $83.4bn (£53bn)

Gift returns: $64.1bn (£41bn)

Wrong sizing on item: $62.4bn (£40bn)

Return fraud: $28.2bn (£18bn)

Didn’t match online description: $6.1bn (£4bn)

Late delivery of items: $4.6bn (£3bn)

All other reasons: $43.8bn (£28bn)

Total: $642.6bn (£409bn)

This report is part of a series looking at retail’s “Ghost Economy” the impact of overstocks, out-of-stocks and returns. IHL reckons the worldwide losses in these three factors add up to $1.75 trillion (£1.1 trillion) total annually due to returns ($642.6bn/£409bn), out-of-stocks ($634.1bn/£404bn) and overstocks ($471.9bn/£300bn).

It hardly needs pointing out that these are very large numbers and they suggest that retail supply chains would see big savings from better use of business intelligence tools.

But I am most struck by the proportion of avoidable returns: a returned product often means an unhappy customer and online shoppers are notoriously fickle. The lesson is obvious.

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