Using data and processes to solve the retail industry’s returns problem

Returns problem

How better data and processes can help the retail industry tackle its £7bn returns problem.

British consumers’ insatiable appetite for returning online purchases has turned into a £7 billion nightmare for retailers. UK returns specialist ReBound recently stated that one in three fashion items bought online is now returned, roughly double the rate for shop-bought goods, and it’s turning into a big problem. 

Data suggests that the average cost to retailers of each return is now around £20, once shipping, storage, assessment, repackaging and discounting is factored in. In small quantities this can be managed, but when the number of returns skyrockets around busy periods like Christmas, the costs can quickly spiral out of control. It’s getting worse too. According to ZigZag, another returns specialist who works with the likes of Selfridges and Boohoo, the number of returns last Christmas were a staggering 24% higher than the previous year. 

In fact, the problem has gotten so bad that some US major retailers like Amazon and Walmart have even gone as far as to tell their customers to keep low-value items once the return has been processed to avoid incurring the costs associated with taking them back.

But with free returns now an accepted, even expected, part of the modern-day shopping experience, what can retailers do to mitigate its impact, or even turn it into a business strength?

While it may seem counterintuitive, the answer lies in delivering the most seamless returns process possible. E-commerce leaders like ASOS and Pretty Little Thing all offer unlimited free returns despite the costs incurred. Why? Because customer loyalty is now the most important factor for all retailers and a smooth returns process plays a big part in ensuring customers keep coming back. Indeed, a study by leading e-commerce solutions provider Doddle found that 84% of consumers now consider the returns experience to be important in encouraging them to shop with a retailer again. Its clear, process is now the priority.  

In addition, the returns process actually offers a rare opportunity for retailers to interact directly with customers and gain invaluable insight into their reasons for returning items. By collecting this data, effectively analysing it and using it to define process, they can identify key areas for improvement within their business processes, that if addressed, could help significantly reduce both the cost and volume of returns being made. 

For example, are large numbers of consumers citing poor product quality when returning clothing items? Sourcing better fabrics or switching providers could address this issue. Is sizing the problem? If so, adding more detailed online sizing descriptions that explain how items fit, introducing virtual dressing rooms, or encouraging customers to bring an item back to the nearest store and try on an alternative size, can all help reduce size-related returns. 

Better data intelligence can also be used to streamline costly logistical issues associated with returns. An example here is if a large number of returns are found to be coming from another country. If so, setting up a reprocessing centre in that country can speed up reprocessing and get items back on shelves faster (which can be crucial to them holding their resale value), while cutting both the cost and environmental impact of the returns process – something customers are becoming increasingly sensitive to.

As these examples demonstrate, when collected, mapped out and analysed properly, the returns process can open the door to a plethora of customer data and analytics that would otherwise remain hidden. However, once uncovered it can help retailers better understand purchasing habits, buyer profiles and snags in the customer journey that can make a huge difference to return volumes and overall profitability. Without this data and attention to process, big retail is missing a golden opportunity to get insights into their most important asset – the customer.

By Colleen Speer, Senior Vice President, SAP Signavio