This time last year, we looked at the issue of returns in relation to the competing pressures of maintaining customer relationships and protecting margins. Here in early January 2016, as this year’s returns peak is in full swing, it seemed like as good a time as any to look back and reflect on what – if anything – has changed between then and now.
January has always been the peak season for returns. According to figures from the UK parcel firm, ParcelHero, there’s an 81% jump in returns in the post-Christmas period when compared with the rest of the year. During the first full working week of January 2015, some £223m worth of unwanted gifts were returned.
Once upon a not-so-long-ago, that was – broadly speaking – the story of returns; the only time it presented itself as an operational and reputational challenge was in the immediate post-Christmas period. Not any more though.
According to CollectPlus, it received its first returned Christmas present at 1.53am on Christmas Day itself. That’s right, while a lot of people were putting the finishing touches to last-minute wrapping, someone somewhere was planning a return. There’s probably a story behind that, but we shan’t concern ourselves with it here. The point is that there are now pressures and expectations on returns systems and processes that weren’t present when many directors of operations began their careers; adjusting to that change is more than simply an operational matter.
Part of the landscape
There’s no escaping the fact that for some retailers, notably in the fashion sector, returns are more prevalent. But what’s causing it and what, if anything, can be done to improve the picture?
Jason Shorrock, Retail Strategy Director at JDA, the supply chain and retail software solutions company which carries out an annual ‘Pulse Report’ into shoppers’ opinions, highlights three key areas.
“In the case of fashion and clothing, the returns rates here are high because when they buy online, a lot of customers buy more than one item,” he says.
Of course, this is not a new phenomenon; as online clothes shopping has become more prevalent, shoppers have had to find a way around the lack of the pre-purchase changing room.
Shorrock continues, and highlights the potential scale of the situation: “One of the things we’ve learned from our annual research is that 29% of shoppers buy items in more than one size. That means one-in-three shoppers know they’ll be returning something.
“Another thing we’ve seen is that receiving the wrong goods or getting a damaged item was cited by almost 45% of people as a reason for returns. The final factor we see is a little more complex, but we saw it around Black Friday. It was staged by some retailers as ‘buy it now before it’s gone.’ That meant some shoppers bought things they maybe didn’t really want. Then they had a change of heart and sent things back.”
A case of ‘be careful what you wish for’ then – a big push on sales is hard to resist but at what potential cost?
Clearly there are some factors over which retailers can exert influence and there are some simple and rather obvious quick-fixes to consider for anyone selling high volume items online. The quality of the product descriptions, the photography, sizing information and so on. This is not just a UK-only phenomenon. In Germany some fashion retailers see returns rates of 60%.
Niklas Hedin, CEO of Centiro, a Swedish company that specialises in logistics management software, and that’s recently expanded into the UK, agrees.
“I know a retailer that specialises in large shoe sizes. They go to great lengths giving people advice on how to accurately measure the size of their feet. But they still have a high percentage of returns, and that’s because sometimes people like to buy multiple items,” he says.
The devil’s in the data
Hedin thinks that too many retailers simply aren’t doing enough with the information and resources they’ve already got, that instead of regarding returns as a problem with an external source, there’s a lot more that can be done internally.
“Understanding the data around returns is really important. If you look at the average return rates of your products you might find some categories with a zero return rate and others with a 70-80% return rate. Straight away you should know that something is wrong with the way a product is being sold.”
The prevailing approach to processing a return is the same for many today as it was five years ago. When an item is picked and packed, a returns label is included in the box in the hope that should the consumer need to return the item they will have kept the label and will use it.
Hope, however, rarely makes for a great strategy. If all you’re doing is including a label in the parcel, the first you’re going to know about a returned item is when that item is back in the warehouse and the label gets scanned. Maybe you’d better hope you have capacity for handling it, too.
Some more evolved approaches involve asking the customer to log on to a portal, register their intent to return and print off a bespoke label. But Hedin sees a move to what he refers to as Returns 2.0 where the whole process has more intelligence built in.
“The maturity around this kind of business insight is fairly low, it’s an issue that’s really just dawning on people now. But you really need to capture the intent to return as soon as possible and as smoothly as possible,” he says.
Becky Clark, (who retired as CEO of parcel data management firm NetDespatch in late 2015) agreed: “At the moment a lot of returns processes can be a bit haphazard. Sometimes people forget to include the returns slip and the first opportunity the retailer has of identifying the owner of a return is if that person calls up and asks ‘did you get my return?’ It’s really important to get to a point where you can link the delivery that goes out with the return that comes back.”
Taking things in the round
One thing is for certain, a little like death and taxes, returned items can be expected to continue being an ongoing part of the retail business. Returns, and managing them effectively, is an issue created by the competitiveness of the retail landscape. As soon as one competitor improves their returns policy you have to play along. It’s not a tenable position to say ‘we charge for returns or we don’t accept returns.’ Not if you have competitors who do.
Hedin concurs: “Customers expect the process of returns to be as smooth as the buying process, and maybe as many as 60% of shoppers will look at the returns policy before making a purchase, which tells you how important this is. Those who do it poorly will notice people don’t’ shop with them.
“Just communicating how you deal with returns will either invite customers or scare them off.”
The understandable dash for revenue growth in the wake of omnichannel retailing’s obvious advantages is not something to be decried. However, having a successful omnichannel strategy is something that requires an omni-strategy – one that considers the need of the business and the customer in 360-degrees, and which looks for unexpected challenges.
Handled well, returns needn’t be a costly burden. They are an opportunity for a retailer to repay the trust shown by the customer, and another touch-point with the consumer. After all, isn’t every interaction with a customer?
From dark stores to dotcom centres, there’s a lesson-in-waiting from the grocery sector for omnichannel returns.
Even after you’ve committed to a truly omnichannel experience, there are other traps waiting to catch you out. Such as the overall effect on all customers’ in-store experience when your check outs and customer service desks become catch-all returns handlers.
One to watch for the short-term will be the development of returns-only floors within larger stores, where all returns can be directed, out of the way of busy shoppers.
This feature first appeared in EDM01, the first print edition of eDelivery Magazine. You can subscribe to it here.