InsightsThe hidden world of returns

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 rehandle an amazing 70% of products.   

After the festive season, many of us will have sent items back. 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. 

Creating loyal customers

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 returns 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 demanding industry

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 centre.*1

Two challenges

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.

A logical solution

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 and effectively. 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.

A seamless combination

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 easy²”, the appeal of innovative automation is easy to understand.

 

1. ‘The growing need for smart e-Fulfilment’ (February 2017): Vanderlande and eDelivery. 
2.  ‘Differentiating delivery: How to win the eCommerce battle’: Accenture.

Erik de Jonge
Author
Erik de Jonge
Market Intelligence Manager

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