Returns: costly or clever?

The trend is threatening to ‘overwhelm retailers with a huge surge of intentional returns that may undermine profits’, according to a study carried out by ERP supplier Brightpearl.

Its report states the majority of consumers (76%) would ‘definitely’ or ‘maybe’ purchase more items if offered a try-before-you-buy option. But the same report said 87% of consumers would return up to seven purchases – with 85% expecting it to be free.

The report also says more than 40% of retailers have seen a marked increase in 'intentional returns' over the past twelve months, when customers deliberately over-order multiple items knowing returns are free or cheap.

Its clear that some retailers, especially fashion retailers, are using cheap and easy returns to drive market share. Brightpearl’s report cites moves by ASOS, Topman and schuh. 

Derek O’Carroll, CEO of Brightpearl said: “This trend could spell disaster for retail business owners if they do not prepare by having the right framework and solutions in place to manage returns. Retailers must be ready for a potential tsunami of returns.”

The experience of Amazon would seem to back this up.

In June 2017 Amazon launched its Amazon Prime Wardrobe service in beta. This actively encouraged consumers to buy more than they need so they can try fashion items on at home and return the ones which they don’t like or which don’t fit. This featured free pick up of returned clothes. Amazon has already started to change the terms of the service, for example, reducing the number of items its customers can order to 10 (from 15) in November 2017. The cost of returns may have influenced its decision.

But surely any retailer that makes returns a key part of the marketing strategy will make sure they have a robust approach to managing returns?

Assuming they will, what is best practice for managing returns?

Consultancy Transport Intelligence has looked at returns in great detail. In December 2017 and January 2018, Ti surveyed 108 retailers and logistics service providers on the global e-commerce market. The report ‘Global e-commerce logistics 2018’ can be purchased from the Transport Intelligence website (www.ti-insight.com. Returns was a major component of the Report.

Respondents were asked: If your e-commerce logistics costs are changing, what is driving the change? The most common response was reverse logistics (31%), followed by a higher proportion of premium deliveries (25%). Labour costs were third (18%).

One of the study’s authors David Buckby says: “There is therefore some evidence to suggest that returns are the chief cost concern for retailers over the next five years.”

That’s a concern for retailers, particularly in conjunction with another of Ti’s findings – that 54% of shippers and 48% of LSPs expect retailers’ eCommerce logistics costs as a percentage of their sales will increase over the next five years.

The consultancy says: “A good returns process is becoming a competitive advantage and retailers should offer a number of product features that facilitate a smooth and efficient returns service.”

Its key findings include:

• Pre-printed returns labels and re-sealable packaging
• An automated refund process
• An option to return merchandise to a physical location
• By outsourcing to a specialist logistics company, a focus can be maintained on the main business of selling, whilst ensuring that customer service and inventory velocity is achieved
• The use of technologies which are being developed for ‘last-mile’ deliveries could, in the future, be leveraged into reverse logistics solutions.

The Report says: “Logistics or express parcels providers can play a more strategic role in the returns process than just handling or moving the product. As they are closest to the end-recipient, they are better able to make decisions on what to do with the return, meaning operational decisions can be taken more quickly.

Transport Intelligence also takes some issue with the commonly used term ‘reverse logistics’.

The Report says: “It is clear that, in most cases, the process is anything but the ‘reverse’ of the initial distribution of goods. Among the reasons are that transport and warehousing operations which were used for ‘forward’ distribution may not be set up for the receipt of returns.

“Consequently, a completely different network may need to be established. ASOS relies heavily on the postal networks, but also, where sufficient volumes exist, uses warehouses to aggregate returns on a national basis before sending them back to the global distribution centre in the UK.”

Ti sees visibility becoming more important, despite the traditionally low priority retailers have placed upon returns. The UK’s Royal Mail offers a tracked service which, according to its management, gives its customers access to tracking along key stages of the parcel journey, including confirmed delivery to returns processing centres, enabling the acceleration of returns processing and the resale of its products.

Ti mentions that technology solutions used for deliveries can be used for returns also. 

This chimes with the work of automated locker provider Apex Supply Chain Technologies. Its range of lockers can be used both as delivery pick up locations, as well as for consumers to send back returns.

Jon Walkington, head of real-time retail – UK & Europe at Apex says: “Traditional collection and drop-off models are clearly a good start. But for future innovation, click and collect and returns must continue to improve as customer expectations increase. Automating these processes using self-serve lockers is the most obvious next step.

“Self-serve, automated lockers allow shoppers to make returns without standing in a long queue and having a potentially difficult conversation with a member of staff. This technology turns a potentially negative experience into a purchasing opportunity as shoppers now have more free time to shop.

“The lockers are web-enabled machines so can contribute to the retailer’s pool of real-time data by providing all collection data to a cloud-based analytics platform. This can help make the returns process as frictionless as possible by providing 24/7 visibility and traceability.”

Taking this a step further, automated storage and handling provider Kardex Remstar has suggested using its automated storage and retrieval systems essentially as 'automated stores', where consumers could buy and pick up items, and leave back returns.

Duncan Licence, VP global solutions and new products at MetaPack, adds that lockers could be combined with greater courier collaboration to drive efficiency.

“Couriers can collaborate around Pick-Up-Drop-Off Points, locker boxes and click and collect services that also accept returns. These are very important because they allow returns to be consolidated, which lowers the costs, particularly by comparison with picking products up from customer’s homes. Consolidation may also involve better use of postal services in some of the less developed markets, and post operators could do more to encourage this.”

He also says that while many retailers are looking at new technology to help with returns, legacy technology is often in the way.

“Some retailers are open to investing in external tools, others have many legacy tech issues to deal with, and may not be in a position to embrace new technology. Innovation is very dependent on the existing set-up and the priorities of individual retailers.”

To conclude, according to MetaPack’s Duncan Licence ‘returns are both a problem and an opportunity, depending on your viewpoint’.

“Some retailers are concerned about the costs attached to managing returns, but others believe that if they get returns right, this boosts customer loyalty and gives them an advantage over their competitors and a way to differentiate themselves. The fact remains, however, that at some point, all retailers will have to find a way to manage returns that suits them best.”