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How should retail handle rising returns? 

The number of items being returned is causing challenges for retailers, but the issue can be tackled with the right support

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As more goods are sold online, it’s no surprise that returns are increasing. Over the last two years alone, returns have risen by 20%. These high volumes of returns drive up retailers’ costs in several ways and can damage business performance. Firstly, consumers expect a frictionless shipping process with goods collected quickly and refunds issued in a timely manner. For this reason, retailers and consumer goods brands selling online are having to collectively invest billions in ensuring their shipping and returns processes are best-of-breed. 

In addition, it is often hard to resell returned goods, and many items end up being burnt or put in landfill. That creates waste and increases carbon emissions at a time when consumers want brands to be more sustainable. 

The challenge for retailers is to minimise the losses from returns while maintaining customer loyalty and brand reputation

“When it comes to shopping online, consumers want ease and convenience as well as a commitment to sustainability – and that applies equally to the returns process,” says Nabil Malouli, senior vice president ecommerce and returns global, DHL Supply Chain. 

“The challenge for retailers is to minimise the losses from returns while maintaining customer loyalty and brand reputation. It’s a tricky balancing act that many struggle to get right.” 

He notes that, in 2010, roughly a tenth of all goods bought online were returned, but this had jumped to a fifth by 2022. Part of the problem is that retailers have focused on increasing sales growth over tackling inefficiencies as they scale up, says Malouli. 

At the same time, many have tried to be as flexible as possible with their returns policies to woo customers in a competitive market, with some offering “try before your pay” options or free returns as an incentive.

Returns avoidance 

According to DHL Supply Chain’s research, around 40% of businesses are now having second thoughts about such strategies and considering changes. A fifth of businesses plan to introduce charges for returns not made in store, and almost half are considering reducing the timeframe in which customers can return items. 

And yet there are fears such moves could backfire, with some 46% of ecommerce firms saying they have concerns that customer loyalty could be affected. There are other steps retailers can take to tackle high levels of returns, says Malouli, one being the use of “returns avoidance” solutions. 

“Artificial intelligence can enable shoppers to try on clothes in virtual dressing rooms before they buy, or see how a sofa or television might look in a computer-generated model of their living room,” he says. “It helps consumers make more considered purchases, and reduces the overall number of goods sent back.” 

Other strategies to prevent high returns include refunding customers and letting them keep an item if the cost of returning it will be higher. Some firms also offer an immediate discount instead of a refund if a shopper receives an item with a minor defect, which can help to avoid a costly resale process or goods going to waste. 

Returns management 

Of course, retailers will always have to deal with some returns, and it’s vital that they handle them correctly, says Malouli. Bad experiences with customer service and delays in refunds can impact a brand’s reputation. Some 58% of firms say they want to be able to offer faster refunds, while 40% have plans to invest in automation or robotics to improve ecommerce fulfilment and returns processes. 

Consumers also expect to be kept informed throughout the returns process, and transparent communications are key. Shipping must also be flexible, with 72% of brands believing that giving shoppers multiple returns options is positive for customer loyalty. 

“Increasingly, consumers want control over where and when their goods are delivered to and collected from, be it their homes, workplaces or pick-up lockers. Flexibility is key, and retailers must be able to provide it,” says Malouli. 

Increasingly, consumers want control over where and when their goods are delivered to and collected from

DHL helps brands by consolidating returns, rather than handling them individually. This speeds up the process and brings down the cost. The company also enables firms to better manage returns when they are received. Fast and effective sorting allows businesses to offer faster refunds and quickly restock sellable items to gain their maximum value. 

Such measures also help reduce the number of goods which end up being disposed of, says Malouli. As well as ensuring sellable items are restocked, DHL identifies and handles items fit for repair and refurbishment as well as recycling. This is even more important now that regulators are cracking down. In May, EU member states voted to ban the destruction of unsold clothing, which accounts for 20% of the bloc’s greenhouse gas emissions. 

According to DHL’s research, 40% of ecommerce businesses globally want to drive down the volume of returns that end up being disposed of. Meanwhile, a third of ecommerce firms plan to start calculating the carbon emissions associated with returns. 

Integrated approach 

Logistics companies such as DHL play a key role in designing and executing more efficient and sustainable industry-wide practices, as they have the scale, infrastructure and access to automation that no single retailer or manufacturer has.

Brands also benefit from partnering with a single integrated solution provider, rather than attempting to handle fulfilment by themselves. 

“Most firms still take a fragmented approach to fulfilment, working with multiple partners in a disjointed way. That’s largely because shipping as a function crosses multiple different departments within a business, with no single division having overall responsibility,” Malouli says. 

He adds: “Getting rid of these silos and taking a more holistic approach will drive productivity gains. With a low-efficiency returns process, the cost per returned item can come down by as much as half.” 

Ultimately retailers and consumer brands must tackle the challenges of high returns volumes head on. Those that prioritise sustainability and customer service as much as sales growth have huge growth opportunities ahead, putting their business ahead of less forward-thinking competitors.

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