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Why getting returns right is so hard for retailers

The return of unwant­ed goods is becom­ing a thorny issue for etail­ers. How they tack­le it will affect not only their prof­its but also the plan­et


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There’s a sim­ple truth about online shop­ping that’s been large­ly over­looked dur­ing the ecom­merce boom: the more goods that peo­ple buy, the more goods they will need to return. It may be obvi­ous, but it is impor­tant, because the issue presents both a com­mer­cial cost and an envi­ron­men­tal con­cern.

Shop­ping online inevitably has a high­er aver­age returns rate than shop­ping in a phys­i­cal store: about 20% ver­sus 9%, accord­ing to research pub­lished by US real-estate investor CBRE. As con­sumers lean more heav­i­ly towards ecom­merce – which account­ed for 32.8% of UK retail sales in March 2021 com­pared with 22.1% before the first lock­down in March 2020 – it’s only nat­ur­al that they are send­ing back more online prod­ucts. 

Sus­tain­abil­i­ty is a huge issue for returns. I’m not sure any­one has real­ly got a han­dle on this yet

The growth in online returns seems to be out­strip­ping that of online shop­ping itself. Reverse-logis­tics spe­cial­ist ReBound Returns reports that its clients, which include Asos, Clarks and Gymshark, record­ed 79% more ecom­merce returns in April 2021 than they had dur­ing April 2020. 

Challenging finances and sustainability 

Han­dling such a high vol­ume of reject­ed goods is expen­sive. An unwant­ed prod­uct must be brought back, inspect­ed and then either cleaned and repack­aged or dis­card­ed, all of which will typ­i­cal­ly costs between £5 and £15 per item. For low-val­ue goods, this rep­re­sents a loss on the trans­ac­tion. Some com­pa­nies, includ­ing Ama­zon, now even cal­cu­late whether it’s worth accept­ing a return or sim­ply refund­ing the cus­tomer and writ­ing off the low­er loss. 

“There’s a very good rea­son why a com­pa­ny such as Pri­mark doesn’t sell online: it knows that it can’t make the mar­gins work,” says Dr Jonathan Gorst, an expert in reverse logis­tics at Sheffield Hal­lam Uni­ver­si­ty. 

This isn’t the only chal­lenge with returns. Each time a prod­uct is sent back, its car­bon foot­print grows. If it can’t be resold, it will often be tossed away, still in its pack­ag­ing. In 2018, the US Postal Ser­vice esti­mat­ed that 2.3 mil­lion tonnes of returned pur­chas­es were end­ing up in land­fills around the coun­try every year.

“Sus­tain­abil­i­ty is a huge issue for returns,” Gorst says. “I’m not sure any­one has real­ly got a han­dle on this yet.” 

At the heart of the prob­lem is the ten­sion between the demand for cheap and con­ve­nient returns and the grow­ing imper­a­tive to con­sid­er the envi­ron­ment. Accord­ing to one recent study, 67% of online shop­pers will read a giv­en supplier’s returns pol­i­cy before mak­ing a pur­chase, with 79% expect­ing free return ship­ping. Despite this, UPS has found that 75% of UK shop­pers cite sus­tain­abil­i­ty as a fac­tor in their pur­chas­ing deci­sions. 

“It’s a tough bal­ance,” Gorst says. “You want the process to be easy for cus­tomers who need to send some­thing back, but not so easy that peo­ple can sim­ply order what they want with­out con­sid­er­ing what they return.” 

Can free returns ever really work?

He remains scep­ti­cal about the sus­tain­abil­i­ty of the free returns mod­el. “The prob­lem is: who’s going to blink first? It’s a bit like Russ­ian roulette. I think there are plen­ty of com­pa­nies that would like to move away from it, but they daren’t because it’s become so stan­dard.”

ReBound’s co-founder and CEO, Gra­ham Best, takes a more pos­i­tive view of the sit­u­a­tion, but he says that com­pa­nies need to be selec­tive. “We have cus­tomers that offer free returns in some coun­tries but not oth­ers, or for cer­tain prod­uct groups only. The process has to be care­ful­ly planned and con­trolled through­out the busi­ness.”

Hir­ing a third-par­ty spe­cial­ist in reverse logis­tics offers sig­nif­i­cant advan­tages. As Gorst notes, many of the retail­ers that man­age returns well have out­sourced the func­tion. 

This isn’t to say that they sim­ply wash their hands of it, says Best, who stress­es that they need to stay ful­ly engaged in the returns process at all lev­els. “Five or 10 years ago, you might have had one per­son respon­si­ble for returns, but it’s now a mul­ti­ple stake­hold­er mod­el,” he says. 

Reducing the need to return

To get returns right, retail­ers need to con­sid­er more than the post-pur­chase process; they need to make it eas­i­er in the first place for cus­tomers to keep their pur­chas­es. 

Online used-car retail­er Cazoo has deliv­ered more than 20,000 vehi­cles over the past 12 months, with a return rate of less than 5%. That’s even low­er than the com­pa­ny was expect­ing, accord­ing to its founder and CEO, Alex Chester­man. Cazoo’s pro­vi­sion of detailed infor­ma­tion to poten­tial buy­ers has, he believes, been a key fac­tor in this achieve­ment. 

“We use 360-degree pho­tog­ra­phy, which pro­vides dozens of images of each car, for instance. In fact, con­sumers get a far more detailed view and descrip­tion online than they would typ­i­cal­ly receive in per­son at a deal­er­ship,” Chester­man says.

There’s a very good rea­son why a com­pa­ny such as Pri­mark doesn’t sell online: it knows that it can’t make the mar­gins work

Peter Leather­land is online sales man­ag­er at Spark Etail, which owns the Eth­i­cal Super­store, a spe­cial­ist in Fair­trade, organ­ic, veg­an and eco-friend­ly wares. He reports that prod­uct reviews writ­ten by cus­tomers are cru­cial for the busi­ness, which sells every­thing from gro­ceries to gar­den acces­sories online. 

“Real reviews can offer a dif­fer­ent per­spec­tive and help oth­er cus­tomers to make more con­fi­dent, informed deci­sions,” Leather­land says. “We place these along­side a Q&A sec­tion for each prod­uct. Shop­pers are able to ask us ques­tions about any item, which we will then answer and pub­lish the exchange on the rel­e­vant page.”

And to help online cloth­ing retail­ers to reduce the num­ber of items that are reject­ed by cus­tomers for being the wrong size, Ger­man start-up Pre­size has even devel­oped an AI-pow­ered tool in the shape of a body-scan­ning app that cus­tomers can use to find the best-fit­ting appar­el. The firm has already worked with big sports­wear brands includ­ing Adi­das and Nike.    

Returns no longer just an afterthought

The pan­dem­ic-fuelled accel­er­a­tion of ecom­merce and the grow­ing impor­tance of sus­tain­abil­i­ty are turn­ing returns into a dynam­ic, fast-chang­ing envi­ron­ment, says Best, who warns that there are “no set-and-for­get options any­more. This requires con­stant mon­i­tor­ing and adjust­ment.” 

And, with cross-bor­der ecom­merce cur­rent­ly grow­ing at twice the rate of domes­tic online shop­ping, the sit­u­a­tion will only become more com­plex.

“Returns used to be the dirty end of the busi­ness – almost an after­thought,” Gorst says. “But they can affect sales, ser­vice and cus­tomer sat­is­fac­tion. This issue real­ly does per­me­ate the whole busi­ness. And, in real­i­ty, every pen­ny that you save on returns will prob­a­bly go straight to prof­it.”