GIVEN THE EXPENSE OF DEALING WITH RETURNS EFFICIENT RETURNS PROCESSING IS VITAL TO MAXIMISE SELL THROUGH VALUE BUT ARE RETAILERS DOING ENOUGH?
Given retailers have said their biggest challenge is in the asset recovery of goods – half of retailers said this was their
biggest challenge when we asked them in our returns survey -- it is only natural they will want to recover as much value from returned products as possible but how do they do it?
Our survey looked at the routes that retailers were commonly taking to recover value from returned products. It showed that reworking and refurbishing product for resale remained the most popular and profitable way of recovering value from products that had been returned with 40% of retailers choosing this route.
At fashion retailer Warehouse the retailer refurbishes all products that are in a resalable condition in line with the company’s packing guidelines and then resells such stock through its standard website – an increasingly common practise for retailers. Fellow fashion retailer Hobbs does the same: “Our product goes back onto the web rather than to store,” says Clare Dobbie, marketing director at Hobbs.
At DiamondGeezer.com CEO Clive Billing makes most rings to order and therefore can’t simply sell on returned rings but instead has to specify when rings are returned. Like the one in five retailers (21%) in our survey he has an onward sales proposition in place. The survey showed that 16% of retailers sold returned product on a seconds or outlet site to maximise resale value.
This is something Billing has just launched with an eBay site debuting at the end of last year. Despite its newness he says the channel has worked well as a method of clearing stock. “We sold 10% of what we put up in the first 3 days,” he says.
How retailers handle faulty product also varies by retailer. At Warehouse digital merchandiser Liam Price says it’s only small proportion of stock that cannot simply be resold. “We have a very small percentage of stock 9less than 0.2%) wich is not fit for re-sale," he says. "This is identified at the point of return and then manually dealt with. This product will either be mended by our in house team of garment technologists or sold via eBay with a % off the RRP clearly stating the fault,” he says.
At Fox’s Outdoor the challenge of dealing with large products that customers can misunderstand – such as tents – makes returns even more challenging.
“If the item is sent back as unwanted or unsuitable we will only accept it back if it is in the same condition as when we shipped it, so the product should be able to be sold again as new on the website or in our store,” says manager Andy Young. Faulty items will be sent back to the manufacturer for credit or replacement. However he admits it can be problematic selling products on that aren’t faulty but where the customer insists it is because of the complicated nature of tents. “Where something is not faulty but the customer insists it is and we compromise we may sell it at a discount to minimise our losses but usually instore as it is difficult to show a product effectively if it is used, otherwise it might come back again,” he says.
At Boden faulty returns are either destroyed or sold off. The retailer has a unique channel for such returns selling out of season product and faulty but still saleable items with regional warehouse town hall sales that have since expanded into showground sales which take place monthly at a number of locations in the UK and which are promoted through local and email marketing.
“They are very cheap and well-liked by our customers,” says customer services manager Peter Hutton.
Though it didn’t show as a high proportion of respondents in our survey a number of retailers also dispose of product through charities. At Warehouse Price says the retailer may send out of season product to its charity whilst Boden also passes on product to charity- including a group of children from Chernobyl that the company regular kits out. In our survey 3% of retailers said that they gave returned items to charity.
Retailers are looking at a number of ways of improving returns rates and returns processing efficiency, many of which are examined in more detail later in this report, but sometimes even some of the simplest changes can be the most effective – especially for smaller businesses. At DiamondGeezer.com CEO Clive Billing says the site has gone through a number of evolutions. “Our returns instructions used to be a typed text page. We added images that showed the process of take the ring, put it in the bag, put the bag in a jiffy bag and put the bag in registered mail but we still had people phoning up so we made a video on how to return goods,” says Billing.
Whilst the concept may sound slightly over the top it has actually worked and reduced queries dealt with by the company. Similarly Billing says the retailer has also reduced costs by making the customer do the paperwork. “They filled in a form previously but reading them was difficoult so we transferred the form online so they can only put in the information we want them too. That also populates our backend and means we’ve already got them booked on to our system which prevents us having to employ someone to book in returns,” he says.
Vicky Brock, CEO of Clear Returns, says change is coming on improving ROI on returns. “We will see an awful lot of innovation and process over the next 18 months because it’s just not sustainable to keep having this stock moving around at peak. You can’t do that indefinitely," she says.
Clear Returns’ predictive tool looks at the reasons why customers are bringing product back in an effort to help retailers better stop such behaviour in the first place. "The shopper themselves tends to assume what happens is that non faulty returned stock goes into store and half hour later its back on shelf in store but that’s not the case,” she says.
She also highlights the problems of electronics returns – what she calls the sizing issue of the electronics world. “In electronics a common returns reason is that it’s faulty but when it goes back to the central warehouse only a tiny proportion are actually faulty and yet there is all the cost of it going back and being tested. There’s a big education piece to be done there,” she says.
How quickly the retail world learns the lessons that returns have to teach them will determine how quickly retailers
improve their ROI around returns.
The impact of the environment
The survey showed that 7% of retailers disposed of returned goods but it also identified another worrying trend - that nearly two thirds (58%) of respondents to the survey said that they didn’t track what was being done with product that came back and couldn’t be resold. Instead most simply write the stock off. The environmental impact of returns is one that has yet to be adequately tackled and yet doing so could in turn actually help reduce returns according to some experts.
Whilist many large retailers do have a 0% to landfill policy as part of their general CSR commitments the amount of handling and reworking of product to resell or even to dispose via other sales routes means they can overlook the real impact of returns. Not so at Sainsbury’s according to reverse logistics manager Steph Tite. She says product is sold in the secondary market and debranded where applicable. “If product cannot be resold, it is recycled in line with our zero waste to landfill policy," she says.
She says the retailer also works hard to minimise the environmental impact of its returns. “We consolidate returns and utilise reverse transport journeys in order to minimise vehicle movements. We also work to a zero waste to landfill policy across food and non-food returns," she says. But could retailers be doing more to educate customers or do customers simply assume product is put straight back out on shelf at the store they have returned product in? At Clear Returns CEO Vicky Brock says the company is working on technology that will show the customer the cost of different return options to allow them to more readily realize the impact of their returns habits so that they can make a more
informed decision about why and how they return goods.
“It’s something we have developed out of our own appalling return habits," she says citing the example of a bin she returned because the colour wasn’t quite right. When she later learnt how much handling that return cost the retailer she says she felt embarrassed and wouldn’t have done the return had she realised the impact it would have.
"It's an experiment that will let retailers show the different costs. It's quite a different thing to say could we encourage the customer to do the right thing but we feel shoppers don't really have any idea of what the implication of their behaviour is," she says.
Retailers generally find their customer don't even think about such implications. “It’s not a priority for customers it would seem," says Hobb's marketing director Clare Dobbie. Peter Hutton, customer services manager at Boden, believes the same. "I don't think it influence the customer's decision to send it back. They send it back for a very good reason and the vast majority of goods are tried on just once. We only have the odd customer who literally buys hundreds of pounds of clothing and sends it all back and they’ve never opened it but most customers have bought something because they think they want it," he says.
At Warehouse digital merchandiser Liam Price says customers don’t think of the implications themselves. “I don’t think this is something at the forefront of our customers mind when returning a product, she just wants her product exchange or money back," he says. the retailer already has various procedures in place, particularly internationally, to ensure that returns are consolidated to minimise the carbon impact of transportation but he says it could well be an area of further focus for the future. “I have no doubt this will be something we focus on further in the years to come both from an environment and cost perspective," he says.
Getting greener alternative return methods
Another possible solution for retailers wanting to improve their green credentials around returns comes through the use of alternative returns methods for their shoppers.
Although goods are more commonly returned via the post office, collected from home or taken to store the proportion of customers returning product through third party collection points – which being in convenience stores and other local venues makes them a greener option - is also on the increase, especially as companies such as Hermes build their networks in this area. Hermes, which runs the the myHermes ParcelShop network currently has around 3,000 ParcelShop locations and is aiming for 5,500 by the end of September. Currenttly around 80% of the UK mainland population is within two miles of a myhermes ParcelShop. Hermes' sales and marketing director Gary Winter says such collection points offer a valuable returns alternative since they are an even more local than their store alternative for customers. “The biggest impact we have in miles is scale. The bigger we are the shorter the journey and that reduces the carbon impact. Anything we can do to minimies that helps immeasurably," he says. And it's a growing trend too. Our research showed that nearly a third of retailers (31%) are now offering third party collection points as an option for their returns.