With hundreds of millions of us around the globe still very much confined to the four walls of our homes (as was the case for much of last year too), online spending over the last twelve months has unsurprisingly boomed.
While e-commerce has been a lifeline for many retailers, the inadvertent explosion of returns has manifested itself as a major pain point too, with issues such as; how to get the millions of goods bought online over 2020 & returned either to stores, pickup points or distribution hubs accurately back into your inventory & ready to be sold again?
Minimizing the financial costs & logistical challenges of the ongoing e-commerce wave is certainly a primary factor for brands all over the globe, but there are other motivations to consider too, including potential benefits to the overall customer experience journey element & the environment.
The Financial Implication of Returns
In the USA alone, consumers are expected to return $101 billion worth of merchandise bought during the 2020 holiday season according to recent data from the National Retail Federation.
While in another recent study from Retail Economics, it was revealed that UK consumers returned over 17% of the online clothing & footwear purchases on e-commerce sales across the whole of 2020, compared to a returns rate of less than 12% for store purchases. As a whole, this meant that retailers dealt with £4.3bn of returns across physical stores & online purchases in 2020.
The report also discovered that the Gen Z age group (18-24) was the most prolific age group of returners, particularly for online purchases. As a comparison, like-for-like online orders for Gen Z returns doubled the entire value of apparel purchases compared for the over 65s age bracket.
The true cost of trading online is being weighed heavily by higher return rates compared to store sales, & this comes on top of a competitive digital landscape & a backdrop of a rising cost per acquisition for online customers too.
In the USA, processing online returns can cost anywhere between $10 & $20, & that’s not taking into consideration freight charges. For items under a certain price point or large items that may incur hefty shipping charges (that merchants can’t pass off to consumers), the cost-saving benefits of simply allowing consumers to keep certain items is a possibility as demonstrated over the US holiday period with Walmart & Amazon.
The variability of online costs is putting pressure on traditional retailers to pivot their propositions & streamline legacy fixed costs. In doing so, retailers are increasingly opening their minds to digital investment, technologic advancements (such as microservice architecture & automation) & partnerships to ease costs, expand capabilities & increase overall supply chain agility & resiliency.
Customer Experience & the Returns Process
Let’s consider customer experience for a moment now. Over the course of the last year, most of us will have experienced the excitement & let down of opening a new item of clothing delivered to the front door, only to find that it doesn’t fit or look quite as you had expected when you ordered it online, followed by the lethargy of realisation that you’ll need to return it.
According to a December 2020 survey conducted by CivicScience, one in four consumers said that having to drop off packages at a mail facility or collection point (especially during the pandemic), is a major pain point when trying to return online purchases.
As is often the case, the returns process can regularly make or break the overall brand experience & savvy (in particular e-commerce pure-plays like ASOS or Boohoo) retailers are increasingly viewing the return process as an opportunity to further engage with customers, providing as it does, an additional touchpoint to enhance the overall customer experience.
While making the returns process as easy as possible & in some cases altogether forgoing returns for some items could stack up from a practical cost perspective, it also makes sense from a branding perspective as most consumers will likely appreciate the gesture since no action is required on their part, helping to reinforce brand advocacy, loyalty & (hopefully) repeat purchases.
Balancing Returns with Environmental Impacts
Simply put, returns come with environmental baggage too, in the form of boxes, plastic bags, bubble wrap, & other packaging, not to mention the added carbon footprint associated with additional courier & freight journeys.
A recent article in Retail Dive cited that, e-commerce returns in the USA alone created 5 billion tons of landfill waste & produced as much carbon dioxide as 3 million cars do in a year.
If a returns process can be streamlined & economised even marginally, the sheer size of the numbers at play here, means that brands can make significant, positive & meaningful environmental gains. And, at a time when there is an increasing shift in the consumer psyche towards environmentally aware & responsible brands, this is not something that can simply be ignored when it comes to returns.
Consumer behaviour has changed significantly over the last year & with e-commerce spending here for the long run, the challenge of managing returns processes more effectively from a cost, customer & environmental perspective is very much under the spotlight.
Creating greater visibility & more intelligence around your inventory (regardless of where it is currently residing in your network); smarter front end omnichannel systems capable of efficiently dealing with customer enquiries; & a greater use of data around transportation processes & networks, are all going to be areas of pivotal importance to brands of all shapes & sizes looking to solve these three key challenges presented by the growing returns trend.
Pieter van de Broecke is Managing Director Netherlands, Belgium and Germany at Manhattan Associates
Manhattan Associates is a technology leader in supply chain and omnichannel commerce. We unite information across the enterprise, converging front-end sales with back-end supply chain execution. Our software, platform technology and unmatched experience help drive both top-line growth and bottom-line profitability for our customers.
Manhattan Associates designs, builds and delivers leading-edge cloud and on-premises solutions so that across the store, through your network or from your fulfilment centre, you are ready to reap the rewards of the omnichannel marketplace.
Header Image by Jim Wilson on Unsplash
This blog post is sponsored by Manhattan Associates