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GUEST COMMENT The hidden opportunity in returns

Returns are now business as usual so brands should look deeper for the often-hidden benefits, says Martim Avillez Oliveira, Chief Commercial Officer, EMEA at ESW (formerly eShopWorld).

The debate over returns separated some years ago into two camps, those who wanted to talk about how to reduce them and the realists who accepted their inevitability and wanted to cut the cost of managing them. Now, the two sides are coming together to look deeper into whether there are any benefits to what at first sight just looks like a margin killer; bear in mind that some brands trading online are having to deal with up to 70% of orders returned. Fortunately, the cross-category averages are not quite so harsh, though still significant. According to Statista, between 5-15% of items will be returned by shoppers, with clothing returns at 25% followed by shoes at 15%, in fact, our own experience at ESW indicates significantly lower international return rates for both clothing and shoes, at around 11%.

Our view is that the fashion industry will have to resign itself to possibly even higher returns in a world where the consumer is now sophisticated in the management of their online commerce life and where competition simply does not allow a brand to get away with an absent or difficult returns process. However, we also believe that eliminating the friction customers associate with returns will be a big win for all direct-to-consumer brands, encouraging return purchases as well as winning greater loyalty.

Any doubts about the need to think smarter come from the hard facts that returns in the US alone estimated cost US$550 billion, which was a 75% increase from 2016. And the impact is not just financial; up to 84% of online shoppers will not use a retailer again after a poor returns experience.

Returns behaviour naturally varies across different demographics so it is important for retailers to start by matching these behaviours to how they market and manage to their own customers. ESW’s ‘Global Voices: 2022 survey of more than 14,000 consumers across 14 countries shows that Gen Z and Millennial shoppers combined comprise 60% of cross-border shoppers globally, and 56% of them admitted they had made purchases from internationally based retailers. ESW research shows that more than 30% of Gen Z and 37% of Millennial shoppers have made 11+ cross border purchases in the past year alone.

However, the same demographic also said in the research that they while they didn’t want to, they chose in the end not to return, saying the process was inconvenient (35%), expensive (34%), and bad for the environment (20%). Additional reasons cited for not returning items included insignificant item cost (28%), an unclear returns policy (26%) and a lack of local collection points (21%).

Going deeper, we can see that geographically, the markets where consumers overall were most likely to avoid returns were China (67%), India (64%) and UAE (64%), with women being 13% less likely to return unwanted items than men.

Clearly, taking away the ‘work’ associated with returns will help attract more Gen Z and Millennial shoppers. Free returns, scheduled pick-ups, and easy-to-access collection points will help mitigate burdensome returns requirements, particularly as 37.9% of consumers in the research said that the cost of returning the item was too high. Moreover, brands that transparently communicate their sustainable shipping options for both deliveries and returns will likely create a more loyal customer base across all generations.

In these figures alone are the keys to a more effective and more nuanced approach to returns management.

The bar continues to be raised in terms of what a high quality, seamless returns experience looks like. Prepaid labels and refund on injection – issuing a refund when the return is scanned at the pickup or drop-off point – are ideal, but at a minimum, consumers should receive a full refund within 24 hours of the return being received. The more pain points retailers can take away when it comes to international returns, the better, including multiple returns centres on all six continents with as many as possible being in-country and local to the shopper. By availing of duty drawback programs in relevant markets, the cost of issuing full refunds can be mitigated.

With a smarter returns strategy, retailers can also win back profit that is often lost in ‘dead’ returns. For instance, if stock is in transit, it is not available to resell and will affect inventory management, and tie up goods for resale. Real time monitoring of the returns pipeline will help ensure stock isn’t held for too long in returns centres and unavailable to sell again. This is particularly important for limited edition or seasonal stock. In addition, returns that are properly processed through the use of manifests in the returns centre, merchandise can be checked, enabling financial reconciliation for the inventory and refunds.

At ESW, making international returns completely seamless for our brand partners has been a cornerstone of how we help them build trust with global shoppers. Ultimately, an effective returns process will not only delight their customers but help them claw back margin, optimise inventory and get shoppers back to shopping again.


Martim Avillez Oliveira, chief commercial cfficer, EMEA at ESW (formerly eShopWorld).

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