Returning products could be called an »international pastime«. German online shoppers return the most often. A PostNord survey shows that more than half (53%) of German customers posted at least one return last year, followed by the Netherlands (52%) and France (45%).
The fact that customers have been able to exchange products by law within 14 days without giving any reason since 2000 has significantly contributed to the »misuse« of the customer-friendly right of withdrawal. According to researchers from the University of Bamberg, an estimated 280 million returns took place in Germany in 2018 (this means that 532 orders per minute will be returned).
Of course, this has its effects. Returns have become the biggest problem in e-commerce and it is inevitable to ask yourself: How can online retailers solve this problem? How do companies manage to minimise returns sustainably – not only in terms of the environment but also in terms of business success?
Reduce returns rate with technology
Buy, try on, send back. This sequence happens far too often when looking at the returns rate in the fashion industry. 50 per cent of the packages with clothes and shoes are returned to the sender.
To minimise false customer expectations and possible returns, brands and retailers are adding more and more information to their products, such as size charts, 360-degree video, or even quizzes. Some brands are going a step further and relying on the latest technologies such as AR and VR.
Virtual changing rooms, already used in lingerie, are spreading throughout the industry to bring the stationary shopping experience to a digital and make it easier for (potential) customers to make a purchase decision.
The right shoe is hard to find online. Nike is now helping its US customers with an augmented reality app. The app scans the user’s feet, measures 13 data points per foot using machine learning and AI software, and then recommends the most appropriate shoe size.
The 3D software provider Assyst helps fashion brands, manufacturers and retailers to offer collections with a perfect fit and enables time-to-market through the software PLM.GoLive. This allows teams to focus on product functionality and high quality collections.
Also, ASOS has recently unveiled a new AR feature called Virtual Catwalk in collaboration with HoloMe. The integration of VR and AR technologies provides the opportunity to provide customers with simple and more personalised shopping experiences that not only increase customer loyalty and revenue, but also minimise financial burdens.
New logistical methods
The delivery, not just the shopping experience should be faster, more personal, more convenient, And what about being profitable? It’s estimated that each return costs a retailer about €20 (€10 for shipping and €10 for processing). It’s therefore not surprising that online retailers have begun to look for new ways to cut costs.
The same goes for the e-commerce giant Zalando, which doesn’t take over processes derived from returns itself but outsources them to a specialised service provider.
The financial newspaper Wirtschafts Woche (Wiwo) said that this measure was officially taken to facilitate the processing of returns in logistics centres. Internally, however, this was justified as a step to reduce costs. And that makes sense because according to experts, returns are one of the biggest cost drivers for Zalando.
The men’s fashion brand Outffitery takes a different approach. They see returns as part of their business model. Here, it’s assumed anyway that buyers won’t keep every item from their purchases. From this behaviour, however, the brand can gain valuable information and thus adjust the customer experience accordingly.
That’s why the Berlin-based brand wants to expand its returns processing so that the returns process can be displayed earlier in the system and thus better plan the expected outlay for returns processing.
The new returns cycle
But what happens to an article if it’s been sent back? The data from the Bamberg researchers confirm what few expect. Only 3.9 per cent of the returned goods are scrapped, so eleven million of the 280 million returned parcels end up in the garbage.
In most cases (79 per cent), the returned goods can be sold again as a new product. 13 per cent of returns are sold as used at a discount and 2.1 per cent of the items are sold to external recyclers.
There are also new business models that start-ups such as Nok or Demooz rely on to sell returned electronics. To do this, they offer customers the ability to try products for several days at home before deciding to buy it.
Europe’s largest secondary marketer Avides’ process is also exciting. The company’s main warehouse is expected to stock 2.6 million articles for Amazon and other online retailers. In 2017 the company had over 54 million euros in revenue.
On the way to sustainable, profitable logistics
Another issue that needs to be tackled now is the environmental impact of returns.
Its CO2 output in 2018 was 238,000 tons. That’s why logistics are bound to change their methods and make them not only more effective and cheaper but also much more environmentally friendly. The pilot project »Pick8Ship« is one of the examples on the market. The start-up offers a sustainable returnable logistics system that covers the entire supply chain. From automated sorting and packing of goods in smartboxes to transport with trolleys (without transport carton and without packing material).
You can find even more examples in our five reading tips of the week!
Our 5 reading tips of the week