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Relieving the Pressure of Returns

by Chris Slover

A recent study revealed that online sales will reach $6.5 trillion by 2023, with e-Commerce sites accounting for more than 22% of total retail sales.1 In tandem with the growth in e-Commerce, returns will grow and continue to be a challenge for retailers. Part of the challenge is that reports indicate returned items lose close to 66% of their initial value once returned, as the cost to evaluate and carry out the returns process consumes over half of their value.

Retailers, especially in apparel, have been burdened with the practice of bracketing, where a customer will buy multiple versions and sizes of a product with the intent of only keeping one and returning the others. This method exploded during the pandemic and is still a common shopping technique.

Bracketing is concerning as the number of returns in landfills has doubled since 2016, from 4 billion pounds to 9.6 billion in 2021, and many retailers report that 25% of all returns end up in landfills. As e-Commerce shows no signs of slowing, retailers are exploring other avenues to alleviate the pressure of returns.

This blog will review the different approaches retailers are taking to address bracketing and returns.

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Changing Customer Behaviour with New Policies

Retailers are slowly questioning free shipping on returns and the established return policies made popular by Amazon and other online retailers. For instance, Gap Inc., which includes Athleta, Gap, Banana Republic and Old Navy, has shortened its return window from 45 days to 30 days, and Zara has instituted a $3.95 return by-mail fee. Some retailers have gone as far as eliminating free shipping for returns and charging customers a flat or actual shipping fee.

Some retailers believe that attrition in the customer base can be a positive, especially for customers who often abuse returns. They believe that if a customer has a financial responsibility tied to returns, even a small one, it could curb bracketing practices. They have also started campaigns to educate consumers on the environmental impact that bracketing can have and offered alternative options like virtual fitting rooms, detailed sizing charts and clear return policies.

Buy-Online, Return-in Store (BORIS)

Along with adjusting policy for returns, retailers with brick-and-mortar locations can offer in-store returns lessening the burden of shipping them. This approach has many advantages for retailers.

  • The return comes directly to the retailer with no shipping costs
  • The return’s quality can be assessed in-store and restocked or tagged for different destinations
  • Increased foot traffic and sales at physical locations
  • Stores can offer customers in-store credit instead of a refund

While BORIS does come with an investment in the backroom for processing the return, the lines between the storefront and distribution centres (DC) continue to blur as many traditional processes have moved partly from the DC to the storefront. Returns and ship-from-store are examples of how operations are increasing their distribution footprint without expanding their warehouse space.

pile-of-shipping-boxes-last-mile

Returns Processing Centres

Some larger retailers have been proactive in managing returns, as they dedicate a location(s) solely as a returns processing centre or hire a company to completely manage their returns process. The key to these operations is speed, as returned items could be seasonal or lose value quickly and will need a quick turnaround to be sold at full price.

Automation and data-driven processes dedicated to product mix and turn speeds are crucial to making these locations a competitive advantage rather than a depository of returned materials.

Auction/Liquidation Option

Many businesses want to avoid dealing with returns, or they have so much volume that they cannot effectively process all the returns they receive. An option gaining traction is selling bins of unevaluated returns to online auction sites or liquidation companies.

  • Online auction sites like Bid FTA and BlueLots purchase trailers of returned items that they evaluate and auction off to their users in fast-moving auctions. Auctions can include entire pallets or single items and have been gaining popularity.
  • Liquidation companies, like online auction companies, purchase a trailer of returns from a retailer, perform the evaluation and offer the goods to resellers online, many of whom sell through eBay, Poshmark, and other online outlets, as well as smaller stores and flea markets. Companies like Nordstrom, Target and Best Buy use liquidation methods to relieve warehouse storage and inventory issues and get back a portion of revenue from returned products.

Transforming returns and making them a competitive advantage is still a challenge for most retailers, and as e-Commerce continues to grow, so will returns. Most retailers see a mix of solutions needed to solve the return equation, from customer education to return processing.

FORTNA Can Help

No matter your approach to returns, FORTNA and its team of experts and data scientists can help develop a strategy that can strike a balance between returns processing, inventory and operational performance. FORTNA enables companies to improve their distribution operational performance with designs and solutions that optimise seamless omnichannel fulfilment and returns.

1 https://www.shopify.com/enterprise/global-ecommerce-statistics#

 

About the Author

photo-of-chris-slover-vice-president-sales

Chris Slover

Vice President, Sales

FORTNA VP of Sales Chris Slover is a seasoned supply chain professional with over 25 years of experience in multi-channel distribution. He is responsible for leading a Strategic Accounts team that works with the world’s top brands. Chris is a founding member of the Tennessee chapter of WERC, a member of CSCMP, and a regular participant in AAFA, FDRA and RILA.