Friday 15th Dec 2017 - Logistics Manager

Tilt the balance

Will retail and logistics create the equilibrium needed to master the returns process? Alexandra Leonards investigates…

This article first appeared in Logistics Manager, July 2017.

Reverse logistics is a measure of how successful other elements of the process are operating. That’s according to Neil Ashworth, chief executive of CollectPlus, who says that when a retailer fails to get the right product to the customer with the right support, whether that be through the way the product is designed, described or photographed, it will lead to returns.

But, even with the perfect design, description and photograph, returns are unavoidable. That’s why it’s so important, when they do occur, to handle the process efficiently, getting products back to the business and money back to the customer as quickly as possible.

The inevitability of returns doesn’t mean that the responsibility of the process falls only on the logistics team. Retailers still need to put plenty of effort into preventing returns where possible. And this starts at the very beginning of the purchase cycle.

“To reduce the quantity of returns, retailers need to understand the various factors including customer behaviour, sizing variability and needs versus use to ensure customer’s expectations are being met more frequently,” says Ashworth. “Offering flexible and convenient returns solutions that fit in with people’s busy lives is an essential part of the customer experience.”

Brands need to couple this with an effective logistics solution, which can involve working alongside parcel services partners that can help handle returns.

Patrick Gallagher, chief executive of On the dot, says that while retailers are increasingly grasping the importance of returns, there’s still plenty of room for improvement. “ Yes, this is clearly an additional cost burden for retailers,” says Gallagher. “I would argue without any hesitation that it’s one worth paying.
“With shopper loyalty at an absolute premium, any retailer worth their salt needs to adapt to thrive.

“After all, what’s the point of a customer being able to order something by voice command, using a smart, IoT-enabled device, if they have to queue up at the Post Office in their lunch break to return it?”

For him, finding logistics solutions that gives customers a convenient service and optimum experience from delivery through to returns will make it more likely that they’ll return frequently. “It’s these retailers who are going to stand out, and succeed in tough times,” he adds.

Sandrine Lagrost, retail segment marketing manager at UPS, agrees that managing returns effectively is crucial to a successful e-commerce operation, and that efficient returns build brand integrity and customer confidence, which leads to customer loyalty.

“However, ensuring that reverse logistics remains economical provides a greater challenge than outbound delivers, particularly if they are international,” she says.

“This was demonstrated in the UPS Pulse of the Omni-channel Retailer survey, which revealed that over 60 per cent of logistics leaders within UK retailers need a third party logistics partner to manage cross-border returns.”

She identified managing defective goods and performing quality checks, two important elements of the returns process, as the key difficulties highlighted by this research.

“It’s about solutions,” says Russell Atkinson, supply chain business unit director at XPO Logistics. “Consumer demand and behaviour shapes supply, not the other way around.

“We have the advantage of solving e-commerce supply chain requirements for retailers and e-commerce companies all over the world, and we adopt many of those practices into our approach of continuous improvement.

“In many cases, we can be proactive to the requirements of higher volumes because we’ve already seen similar challenges somewhere else in our global operations.”

Lagrost says that both retailers and logistics providers have a role to play when handling the increasing number of returns. It’s about achieving a balance between the two.

“From a retailers’ perspective, having the right products properly displayed online – including accurate sizes and pictures – will help to reduce returns,” she says. “That said, it is important that customers are reassured that they can return items without the process being too costly or inconvenient, so finding the right logistics partner is essential.

“Finally, retailers should make sure that any return costs are included within the business model from the start, to avoid any nasty, and costly, surprises.”

William Walker of Walker Logistics says that returns aren’t a growing problem, but that they are certainly increasing in volume. “As a result, a lot of companies are finding that they’re becoming harder to manage,” he says. “The ability to offer easy, hassle free returns is an incentive a lot of online retailers offer to give their customers the peace of mind that comes with knowing they won’t be ‘stuck’ with a purchase they do not want.

“You expect a higher percentage of returns in the clothing and footwear sectors where consumers often order the same item in two or three different sizes – keep the one that fits and send the others back.”

But surely retailers could solve the problem by making the returns process harder for the customer? Saving hassle for the business and its supply chain partners.

Losing customers

“I wouldn’t imagine brands or retailers will want to risk losing customers and revenue by introducing significant changes to their returns policy,” says Walker. “So, it falls to the logistics company to operate a cost-effective, yet highly efficient model that delivers a win-win scenario for the seller and the consumer.”

He says that as a third party logistics provider handling returns, Walker Logistics sees this as a core service and one that should be handled without too many complications.

“As long as we have been briefed on the process, volume expected and turnaround time dictated, then it is possible to set-up processes, space and personnel to meet targets,” says Walker. “Of course there is a cost to handling returns and, to an extent, the efficiency of a company’s returns operation relies on the end customer’s ability to follow the necessary steps when sending goods back, but, for a good 3PL, high volume returns should hold no fear.”

XPO’s Russell Atkinson says that savvy retailers see returns as an opportunity to build customer loyalty, rather than as a problem.

“They rely on logistics providers to meet customer expectations,” says Atkinson. “For online retailers, especially, returns are an integral part of supply chain planning.

“At XPO, last year alone we managed more than 50 million items returned to our sites in the UK.”

He thinks this is driven by growth in e-commerce and changes in customer behaviour, like over-ordering and returning items they don’t like as part of a normal pattern.

“It’s the online equivalent of taking 10 items into a changing room in a store and only taking two items home,” he adds. “Today’s customers need to know they are able to return unwanted goods quickly, easily and ideally free of charge.”

Likewise, On the dot’s Patrick Gallagher says that returns are like all parts of a convenient fulfilment offer, and have become a business-critical battleground for retailers more than ever.

“Today’s retail landscape is a continually evolving beast, but certainly not an easy one.

Recent ONS figures show that retail spend in the UK is falling – but while shoppers may be tightening their purse strings and taking extra care with where they spend their money, they still expect retailers to work around them,” he says. “For retailers of all sizes across all industries, this means they need to do everything in their power to remain competitive and gain customer loyalty. Fulfilment is an area where they can quickly and efficiently prove their worth and stand out from the crowd.”

The consumer journey is expanding and becoming increasingly intricate. Returns now play a huge role in this journey. “With more customers transitioning from the high-street to online, there has been a natural increase in returns. Shoppers have become accustomed to buying multiple products with the intention of returning those that aren’t in the right colour, style or size upon arrival. Inevitably, this upward trend for returning goods places increased pressure on a retailer’s fulfilment capabilities,” adds Gallagher.

The future

So what do retailers and logisticians need to do in future to handle the increase in returns?

“I feel that brands and retailers will have to assess how much they gain by offering an easy and frequent returns policy against the cost of implementing such customer-friendly returns policies,” says William Walker. “Ultimately returns cost money and the fewer returns you have the more profit you will make, so I am sure in the long term some adjustment is inevitable.

“But from a logistics perspective, we are more than happy to adapt and grow with the reverse logistics requirements of our customers.”

XPO thinks that retail strategies are already evolving towards richer online content so that consumers are happy with their purchases, and return as little as possible.

“At XPO, we use our global transport and logistics experience to receive and process returned items efficiently, often using customised processes tailored to each of our retail customers,” says XPO’s Russell Atkinson. “These can include spot cleaning, stain removal, sewing repairs and re-boxing so that products can be made available for purchase again.

For CollectPlus, the outlook for reverse logistics is bright.

“Returns are part and parcel of the modern shopping journey and so retailers and their partners must work hard to develop solutions that match customers’ needs and maximise the customer experience while minimising the impact to their bottom lines,” says Neil Ashworth of CollectPlus.

Tailored solutions for local markets

Alongside shifting consumer habits, the approach to reverse logistics by retailers and their logistics partners is also changing. Companies are pushing forward big innovations and finding ways to better handle increased returns.

“Increasingly, customers are being offered tailored solutions for their local market, along with portals that allow customers to track their returns,” says UPS’ Sandrine Lagrost. “Within retail, more and more businesses are now asking their customers to declare their returns online, as it makes inventory management and knowing what will be coming back in easier for the retailer.

“At UPS, our Returns on the Web service allows our e-commerce customers to integrate UPS return services functions directly into their virtual storefront or other internal systems.”

The nature of fashion retail has always seen high levels of returns. To tackle this, increasingly retailers are offering fitting applications online, which enable customers to enter their shape and size. “This allows the retailer to guide customers to correctly fitting garments, reducing the volume of returns in the future,” adds Lagrost.
CollectPlus tries to keep consumers happy, loyal, and more likely to shop with retailers again by offering a drop off service. “Conveniently located drop off points with long opening hours help customers to return unwanted items at a time and location that works for them,” says Neil Ashworth. “The promise of a fast, tracked return can also help reassure customers that they will be refunded swiftly.”

This means the opportunity to ‘re-sell’ to the customer is high, as their intention to purchase will still exist.
“Pass My Parcel was the UK’s first parcel shop solution to offer a mobile-enabled returns option, which has a number of key benefits for both our retailer clients and their customers,” says Louise Ryan, strategy and business development director at Pass My Parcel. “The process meets the growing consumer demand of managing all of their online activities quickly and easily via smartphone.

“As the need to print a label is removed, this also reduces costs for the retailers, and is a more environmentally responsible approach to the management of returns.”
At Walker Logistics, the business personalises returns for each customer to deliver a bespoke service. “When talking to a new customer we discuss the process they offer or would like to follow in conjunction with the expected volume and tailor our service accordingly,” says William Walker. “Often the most crucial areas to consider to ensure a smooth returns operation, is communication and ensuring that the labelling and packaging offered for returns allows the item to be easily identified.

“Therefore we spend a lot of time on returns strategy,” he says.

Understanding the returner

Is there a new culture breeding the higher levels of returns? “The culture has not changed – it is merely the channel through which it is exercised that has changed,” says CollectPlus’ Neil Ashworth. “Customers have always tried garments on as part of the purchase decision – it is just that the bedroom has become the dressing room.”
Ashworth thinks that while at first glance online shoppers who frequently return items can seem unattractive to retailers, they shouldn’t be ignored.

“They reward their favourite brands with regular purchases across seasons, sustained loyalty, recommendations to family and friends and in the long term, a high lifetime value, making them an attractive customer segment,” adds Ashworth.

Online buyers now expect no less than a rapid and free returns policy that will enable them to shop while knowing the returns process is simple.
“We know that a lot of consumers review an online retailer’s returns policy before making a purchase and, if choosing between different sellers, will pick the retailer that appears to offer the quickest and most straightforward returns policy,” says William Walker of Walker Logistics. “When it comes to customer returns, online retailers have allowed consumers to believe that it is down to the seller to do all the work and, as a result, in a lot of cases, this is precisely what happens!”

XPO Logistics has noticed a definite shift in behaviour, with consumers now wanting their purchase in hand within a day or two, or even hours.
“There’s also a tendency to purchase higher volumes, knowing they will be returning some items,” says XPO’s Russell Atkinson. “We have seen that retailers’ returns policies can influence the likelihood of a consumer buying from them in the first place, and then buying again in the future, with free shipping being a big motivator for returns.”