In an increasingly competitive industry, retailers can no longer rely on providing the right product at the right price, with customer service taking center ground in the battle for consumers’ hard-earned cash.
Retailers that have performed well in recent years have done so by providing a consistently high level of customer service, including fast, efficient delivery alongside a straightforward returns process. Shoppers are demanding an experience that offers convenience at every touchpoint, which means being faster, better and cheaper than the competition.
While the holidays have long presented a challenge, new events such as Black Friday and Cyber Monday have further exacerbated the reverse flow of goods. A study from the U.K.’s Royal Mail earlier this year predicted that the first working day of 2019 would see 75-percent clothing returns and 42-percent electrical goods returns. Total online returns were expected to rise to £5.6bn (US$7.28bn) on that day alone, now branded as “Takeback Wednesday.”
Returns currently cost retailers more than £60bn (US$78bn) a year; a figure that will continue to rise thanks to emerging trends such as buy now, pay later. The introduction of “try before you buy” is also likely to become more prevalent; we’re likely to see increasing numbers of retailers offering the service to secure both sales and brand loyalty. Potentially generating large volumes of returns, an intelligent reverse logistics system is essential if the service is to work efficiently, both for the retailer and the customer.
With an intelligent reverse logistics system in place, both the buy-now-pay-later and try-before-you-buy models will mean better service, more sales and increased profit for retailers.
It has also been speculated that some retailers that currently offer free returns will begin to charge for the service. Yet for the majority, introducing new charges is a dangerous tactic that few will be bold enough to attempt.
Consumers aren’t focused solely on cost; a free returns process will fail if it isn’t convenient, efficient and able to meet expectations. Indeed, a recent study reported 60 percent of online shoppers wouldn’t use a retailer again if their returns process proved difficult.
There’s no getting away from the fact that returns present a significant challenge for retailers. However, most are aware that they do have some control in managing and reducing the number of backward-moving products. To this end, savvy retailers continue to invest in increasingly sophisticated technology to help consumers find the right product online, including extensive Q&A sections on ecommerce platforms, virtual changing rooms and online helpdesk teams. In addition, artificial intelligence (A.I) and big data offer tailored product solutions akin to a personal shopper service.
As the return rate for goods purchased in-store is significantly smaller than that for online transactions, by offering the equivalent advice and expertise, online retailers hope to be able to reduce returns. Recent research supports the theory, with 52 percent of consumers who returned clothing or footwear doing so because it didn’t fit.
However, despite continued efforts to reduce returns, it’s important to note that there are many reasons for the high volume of products moving backwards through the supply chain, many of which have nothing to do with the suitability of goods or desire to keep them. Take product recalls, plus products such as white goods, which must be handled carefully as their usefulness comes to an end. Given the waste and sustainability issues created by returns within this bracket, it’s even more vital that the way they are processed — handling, transportation and resting place — is as efficient as possible.
When managing returns, whether resalable goods or products to be disposed of, inefficient processes can lead to items not being processed properly and resold as they should be. This sometimes results in products that should have been sold ending up in landfill. Each year, 2 million tons — the equivalent of £4bn (US$5.2bn) of returned goods — are sent to landfill. This not only contributes to environmental issues, but doesn’t make sense financially, either.
There’s no denying that the reverse supply chain can be a complicated matter, but there are better solutions, aided by technology and the capabilities it now offers. Smarter use of technology is essential to handling reverse logistics efficiently and profitably, achieving that careful balance between reducing costs while keeping customers happy, and preventing unnecessary waste while maximizing profit.
Retailers should be taking advantage of complete-visibility supply chains, including returned goods. Products should be graded, re-packed, refurbished and returned to prime stock. Where that isn’t possible, the product should be prepared for resale on alternative marketplaces.
For retailers of any size, inventories and stock management can be difficult to manage, balancing commercial and consumer demands. Visibility of stock in real time is often the biggest challenge. Managing stock across multiple distribution centers, warehouses and stores, plus returns on a global journey, requires careful planning. Having the right stock in the right place at the right time is fundamental to protecting the bottom line.
The condition of returned goods is also a significant obstacle for retailers. Again, however, there are solutions available that are painless for the retailer and, by returning previously unusable goods to their best destination, leaves it with a net profit.
Data-rich systems offer retailers the opportunity to mine highly valuable business intelligence and data analysis to make informed, and ultimately more effective, commercial decisions to maximize residual value from returns. For example, analyzing the flow of goods in and out of the business will identify the buying habits of consumers, equipping retailers with information to allow them to better plan for future seasons and trends.
The pressures on retail will not relent, with consumers expecting an ever-more sophisticated level of service, the try-before-you-buy model being a case in point. However, while the huge volume of returns continues to grow, it also brings opportunity for those retailers willing to innovate, using technology and data to deliver an efficient, streamlined supply chain, protecting the bottom line and creating a more sustainable business.
Ben Balfour is commercial director with Advanced Supply Chain Group (ASCG).