Since the explosion of e-commerce, modern consumers have benefitted from the returns policies offered by retailers. This is evident in the fashion market, which leads the way in terms of its high volume of returns. In fact, the average return rate for fashion items is 30%, with some companies having to re-handle an amazing 70% of products.
Multiple surveys indicate that at least 60% of us will review the returns policy before making a purchase. The returns industry is complex and volumes can often reach incredible levels inside a distribution centre (DC). This means that retailers are continually challenged to keep their customers happy.
In 2020, many physical stores were closed during the COVID-19 pandemic. This meant that more consumers turned to online shopping, growing the e-commerce market still further. As an example, 43% of shoppers that didn’t buy fashion products online before the crisis, began using online channels1.
While pure online players performed favourably during the pandemic, there is likely to be a more permanent shift of omni-channel companies and brands to the online environment. And although there has been a slight decrease in the percentage of returns during the crisis, this is not considered to be sustainable.
Indeed, given some changes in attitude, the development of new business models will lead to higher return flows. Rental and second-hand platforms are becoming increasingly popular in the so-called ‘sharing economy’ and such trends are expected to play a significant role in the years to come.
The major reasons for consumers to return a product (such as clothing) are that it doesn’t fit, they are disappointed with the quality, it looks different than expected, or that the order wasn’t delivered correctly. On occasion, shoppers will even order clothing in different sizes to guarantee that they will receive a product that fits them properly.
Consumers also expect the returns process to be as smooth as possible, with long return periods available. In addition, they want rapid reimbursements and a range of return options. In short, an effective returns process can be a key differentiator for e-tailers in the creation of loyal customers.
A traditional returns process begins when the consumer labels the product and sends it back to a retailer. Items are then processed at the returns centre, sorted, checked for damage, reconditioned (cleaned or ironed), repacked and brought back into circulation. Most importantly, the item must be available as soon as possible for resale, preferably on the day of arrival.
In this ‘industry within an industry’, returns can represent a high cost for e-tailers, as well as being labour intensive. A typical return can cost somewhere between €10-20. If 70% of products are being returned, this puts considerable pressure on profitability. In addition, 42% of retailers aren’t even aware of a return until it reaches their dedicated returns processing centre2.
Due to the complexity and cost pressure involved, e-tailers must strive to either prevent returns or at least establish efficient returns processes. Prevention involves the creation of measures to stop returns at source and improve the chances for ‘first-time right’ orders. This includes virtual fitting systems, video chats with customers, artificial intelligence, and vouchers and discounts if a customer doesn’t issue a return.
For items still being returned, e-tailers must implement effective warehouse processes. These include setting up local processing centres (to be closer to customers and reduce transport costs), the outsourcing of returns handling, as well as offering customers the possibility to try on their clothes at a pick-up point, such as in a store. This also increases the potential for a shopper to make additional purchases.
The final option is warehouse automation. For good reason, 46% of retailers are planning to automate their returns handling in the next two years and this is being given the highest priority of all warehouse processes. If returns have to happen, companies want to handle them efficiently. Automated material handling systems can make tremendous improvements in this area.
At the initial point of entry, returned items can be easily introduced to the system by Vanderlande’s sortation systems, such as the CROSSORTER. Shuttle systems (ADAPTO, for example) are ideal for compact storage, especially if you need a storage area the size of ten football fields to store returns!
Our AIRPICK solution, which uses a pocket sorter, also enables easy returns processing, because items are handled directly and made automatically available for new customers. Not only can returned goods be seamlessly combined with regular stock, but the returned item can even be prioritised and dispatched first during order picking.
This combination of automated technology makes it possible to efficiently incorporate time-critical processes in a seamless and logical way. After all, in a landscape in which “81% of consumers would shop more with a retailer that made returns easy3,” the appeal of innovative automation is easy to understand.
1. ‘Survey: Consumer sentiment on sustainability in fashion’ (McKinsey & Company).
2. ‘The growing need for smart e-Fulfilment’ (February 2017): Vanderlande and eDelivery.
3. ‘Differentiating delivery: How to win the eCommerce battle’: Accenture.