The Dark Side of Ecommerce Returns

Returning goods is not a new phenomenon, but the rise in e-commerce has seen a change in consumer buying habits.

Having the option to buy a selection of items, especially when looking at clothing and footwear, trying them on in the comfort of your own home, and then sending back what you don’t want has proven to be an attractive option for consumers.

This has also spread into other sectors such as electronics and homeware.

Consumers want their goods quickly; equally, they want their money back fast for any returns.

Any delay in getting their money back is a delay in being able to spend it again, and retailers want to ensure this money is re-spent with them!

Consumers certainly do not consider the impact additional returns have on the retailer – that they have to be factored into the item price, which ultimately means that everybody pays more.

The value of returns is staggering – in 2015, research from the retail analyst firm IHL Group put the global cost of returns at US$598.6 billion per annum (€541.63 billion). IHL’s report suggests that Europe accounts for 43.7 percent of all returns globally, while in the United States, the National Retail Federation expects that eight percent of all sales this year – equating to roughly US $264.8 billion (€239.6 billion) - will be returned.

It is estimated that roughly 30 percent of multichannel women’s fashion purchases are currently returned, while up to 14 percent of consumer electronics goods are sent back. A German study in 2014 saw wildly varying rates for returned goods, including 5 percent of washing machines!

Summary:

• The explosion in e-commerce and customer-centric returns policies have led to return rates as high as 50 percent.
• Estimates now put the cost of global returned items at US$598.6 billion (€541.63 billion) per annum.
• The cost of handling returns is typically three to five times higher than original shipping costs.
• Businesses are challenged to making reusable stock available for resale as quickly as possible, particularly in the apparel segment, where items are often seasonal.
• Return handling costs are a global issue – even where labor is cheap. Returns mean double logistics cost (shipping and reverse-logistics), no turnover and sometimes a disappointed customer.
• If returns are not handled according to the customers' expectation, they often communicate their negative experience via social networks or post negative reviews on the supplier's site, discouraging future customers.
• An efficient returns solution enables a smooth experience for the consumer, accelerated availability of returned goods, lower intralogistics personnel costs and higher storage density.