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GUEST COMMENT Re-evaluating returns policies to reduce costs and boost perception 

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James Hyde is chief product officer and founder of James and James Fulfilment

As the cost of living crisis continues, could free returns become a thing of the past? It’s no secret that retailers are operating under significant cost pressures, meaning even nominal returns fees will not safeguard margins. Fears of disenfranchising customers by increasing returns costs are understandable, but today many consumers are favouring sustainable products and actively seeking out businesses that embrace the circular economy. By combining highly strategic fulfilment and returns processes with strong ethical messaging, retailers can both reduce costs and enhance customer perception.

Optimising operations

With the golden quarter fast approaching, the cost of returns is top of the agenda for many retailers. Products were returned in record numbers last Christmas and the current cost of living crisis means 2022 could be even worse. In response to rising costs, consumers are becoming more considered in their purchasing decisions – a trend which could drive a surge in returns in areas such as fashion.  

While the initial order value might not immediately decrease, it’s likely that customers will decide to keep fewer items. Indeed the act of ‘wardrobing’ – when a customer buys a product, uses it and then returns it as ‘unused’ to attain a full refund – has increased in recent months. Many will start shopping around for better deals and last-minute changes, such as delivery delays, will prevent others from making impulse purchases.

Indeed, the customer is not always at fault. Sometimes they receive the wrong product. The item may not be as advertised, it could be damaged or arrive too late – all valid reasons for return. Sometimes customers will report a negative experience with the company post-order. But these issues are avoidable for retailers and therefore should be a priority. 

Utilising outsourced fulfilment that consists of a single, integrated order management system (OMS), warehouse management system (WMS) and courier management system (CMS) is a great way to optimise operations and reduce returns. Retailers should have confidence that picking and packing will be 99.9% accurate. Same day dispatch should be a given and both retailers and their customers benefit from carefully managed and tracked delivery services. With each aspect of the fulfilment process fully optimised, ‘retailer blame’ returns are vastly reduced, enabling the focus to become changing customer behaviour.

Final straw for free returns

After decades of free returns, retailers are toughening up. The tide started to turn earlier this year when major retailers such as Boohoo, Next, Uniqlo, and Zara took the decision to remove free returns. While “try-on hauls” seen on YouTube and TikTok certainly contribute to the issue, data is also vital in both understanding trends and indicating problem customers. Back in August, the same customer was banned from both Amazon and John Lewis following repeated returns and complaints.

Highlighting problems within the retailer’s products and/or processes is reliant on fast, accurate fulfilment data. If the same product is repeatedly returned due to small sizing, for example, this can be easily rectified by amending the product description and including advice to size up. Money can also be saved by swiftly withdrawing electrical items that repeatedly break – a potentially huge financial and reputational drain.

Access to accurate information is also key to tackling the inventory problems created by returns – which could arrive weeks later and possibly be damaged. Getting these products back into stock and ready to sell requires time and money, so efficient processes are important. Without real-time information on inventory levels fed directly to the webstore, retailers risk being stuck with unsold items – and could miss key trading periods such as Black Friday and Christmas.  Businesses also need to gain a better understanding of the true cost of returns to determine the margin on products and improve merchandising decisions. If products from certain manufacturers or suppliers are disproportionately returned, for example, establishing this is vital to safeguarding margin in the future.

Ethical positioning 

By improving ecommerce processes, retailers can reduce the number of returns experienced. But they should also consider changing their messaging to highlight the importance of sustainable purchasing behaviour. Returns bring significant environmental damage. Along with additional shipping and transport, sorting and repackaging are labour-intensive processes. It is not possible to reuse plastic poly bags and damaged items occasionally end up in landfill.

Introducing a small fee for returns to today’s increasingly cost-conscious customer could have significant environmental benefits while reinforcing consumers’ perception of the retailer. Furthermore, circularity and sustainability are becoming ever more important factors driving customer engagement at every stage of product life, according to Deloitte. 

We’ve seen significant changes in consumer behaviour in recent years. The five pence charge for plastic bags reduced usage by 85% in one year, and the number of bags purchased has continued to fall ever since. Retailers should not be afraid to share sustainability issues with customers. The way returns policies are considered, presented and delivered will increasingly influence customer perception of a brand. With a well-implemented, well-communicated returns model, retailers have the opportunity to both reduce costs and boost their reputation.

James Hyde is chief product officer and founder of James and James Fulfilment

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