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Tackling the ‘returns crunch’

The cost of living crisis is having a major impact on the retail industry, with far-reaching effects beyond stunted sales, particularly when it comes to customers sending items back. Several global brands have issued profit warnings attributing their financial under-performance to rising volumes of customer returns.

Retail logistics company Advanced Supply Chain Group (ASCG) recently surveyed 1,000 consumers and 100 retailers to shed more light on the issue; the factors driving customers to make more returns, and the strategies that retailers are considering for addressing the problem, including charging for returns which has proved controversial with customers.

But with 63% of retailers experiencing an increase in the number of items being sent back during the cost of living crisis, it’s perhaps no surprise that more brands are beginning to charge customers to make returns.

We found that soaring living costs have altered the way that shoppers approach returns. 42% of consumers say they’re now more likely to return items due to financial pressures, while the frequency has increased, too. A staggering 72% of shoppers are now making one return per month. As an industry, we need to consider whether those changing habits will persist once the cost of living crisis is behind us.

It seems the economic climate and financial hardship are also having an emotional impact on shopping for non-essentials. 60% of consumers admitted to indulging in a little retail therapy to escape the doom and gloom of rising living costs, yet many of these purchased products are destined to be returned. 41% of shoppers admitting to ‘shopping guilt’ for treating themselves, with products being sent back when people later realise that they can’t afford them.

Meanwhile, another worrying trend is escalating. Around two thirds of retailers are seeing significant growth in dishonest returns. Half (50%) have seen the number of disingenuous returns grow by up to 20% during the last 12 months, while 14% have seen an increase of at least a third.

Combined, all these pressures have created a ‘returns crunch’ for retailers and consumer brands, with margins squeezed from all sides. It is placing enormous stress on the industry during an already challenging period, so it’s imperative that retailers find a workable solution.

Charging for returns is perhaps the most obvious option. 59% of retailers currently offer free returns for orders of any value but are rethinking their approach.

Retailers intend to consider a range of potential solutions over the coming year; over a quarter are mulling the possibility of introducing specific policies for customers who repeatedly return large volumes of products, while 20% may choose to limit the use of flexible payment options as a means of discouraging impulse buys and thereby reducing return volumes.

Alternatively, 25% of retailers plan to look at making savings within supply chains to enable them to continue offering free returns. These businesses know that sending items back is a valuable part of ecommerce, and the shopping experience, and they want to embrace that.

The supply chain is a first port of call for most, not necessarily to make cuts but to improve efficiencies. Using a tech-led approach with bespoke software and smart data, we can support brands and retailers to drive efficiencies by combining insight from every channel, from the warehouse and fulfilment, through to freight status. Returns can be effectively integrated into supply chain models, which generates valuable data and insight that helps tackle problems of false returns. This can reduce waste and boost sustainability, while also making savings.

With inflation remaining high and living costs continuing to eat into discretionary spending, 2023 will be a challenging period for retailers. An efficient supply chain will ensure retailers and brands are best placed to mitigate the returns crunch, looking after both customers and their profit margin. Ben Balfour, COO at Advanced Supply Chain Group (ASCG). Click here to download ASCG’s eBook to read more about the impact of the cost of living crisis on customer returns.

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