Effective Ways to Cut Costs on Retail Consumer Returns
Retail has a returns problem — especially in the online space. The ease at which products can be purchased online and the inability to try them before buying is causing the number of returns to soar into the stratosphere.
It's estimated that US customers are set to return around $100 billion worth of goods which were purchased between Thanksgiving and Christmas 2019 — a record-breaking figure. And, while the issue is certainly more pronounced in the online space — ecommerce purchases are three times more likely to be returned than those bought in physical stores — brick and mortar has its fair share to deal with as well.
All this leads to a situation where retailers need to find new ways of keeping customers happy while mitigating the losses of such a large number of returns.
Yes, we know. It's almost impossible to have any discussion of the state of almost any sector of the retail industry — or indeed any industry — without invoking Jeff Bezos's ecommerce tyrannosaur. However, Amazon has a lot to answer for when it comes to the current returns crisis.
One of the reasons customers so often default to Amazon is the unprecedented level of convenience it offers them. Not only does it offer an eye-watering range of products at competitive prices delivered rapidly, but it also gives customers a no-hassle returns policy. For Amazon, this is an easy cost for them to absorb — its retail operation isn't what generates its staggering profits anyway. But it creates an issue for smaller retailers.
This is because customers have become accustomed to this level of service and gravitate towards brands that offer them.
However, the costs associated with returns are many. First, any expenditure related to the initial sale — marketing, customer service, etc. — is wasted. Stocks are reduced as goods are removed from inventory and returned items can lie dormant in warehouses waiting to be processed for weeks at a time, and each needs to be handled individually which increases labor costs. Products may need to be repaired, refurbished, and/or repackaged before they can be added back into stock.
That's not to mention the items which must be junked completely. It's estimated that US retailers send roughly five billion pounds of returned goods to landfills — the equivalent of 5,600 fully loaded 747 planes.
Thankfully, digital technology is coming to the rescue and providing ways to mitigate or eliminate the problem of retail returns.
Some of these solutions are going with the idea that prevention is better than a cure. They include tools which can help customers make the right choice the first time, thus reducing the chances of a return being necessary at all.
Smartphone apps such as Sizer and MTailor use augmented reality technology in conjunction with smartphone cameras to allow customers to measure themselves and find right-sized clothing. Not only does this technology reduce the number of returns made necessary by improperly sized clothing, but augmented reality can also help customers visualize what they will look like wearing the items. This prevents the "dressing room at home" problem, somewhat.
However, even with such technology in play, returns will still often be necessary.
Recent years have seen the emergence of companies that will help physical retailers facilitate returns while increasing the convenience for customers. Brands such as Happy Returns work with retailers and offer hundreds of locations, known as return bars, where customers can return items with a minimum of hassle. Customers get refunds initiated instantly, don't need to print or package anything, and don't need to travel back to the store. On the other hand, brands get the heavy lifting of returns handled for them and get access to high-quality metrics which can help them track the returns situation within their operation.
Digital technology is also helping with the processing of returned goods at the warehouse level. Items can be scanned quickly and easily and assigned to different departments — waste, refurb, restock, etc. — automatically. Work can be efficiently scheduled to make sure items are not left languishing in dusty stockrooms for extended periods of time and can be cycled back into stock or sent to the landfill in as expedient a manner as possible.
The returns crisis is one that is set to continue to plague the retail industry throughout 2020 and beyond. Retailers don't want to alienate their customers with excessively strict return policies and must, therefore, find ways of making the facilitation of returns as cost-effective and efficient as possible.
Returns are set to be a hot topic at Future Stores West 2020, taking place in June at The Sheraton Seattle.
Please download the agenda today for more information and insights.