The returns hangover

The retail industry faces two major headaches as it moves into a new year: online returns and tackling growing waste. But, by using smart technology retailers can become more sustainable while saving a fortune in 2022, writes OtailO chief executive Ronit Mayer.

While Christmas online shopping and the January sales are offering retailers welcome respite after two years of difficult trading, they are also creating longer term headaches for the industry.

Online shopping is offering a vital life-line to retailers, offsetting COVID-19 decimated high street sales. In the UK, retailers rang up some of the biggest Black Friday online sales on record back in November, according to Barclaycard. While, in the United States, a report by Mastercard showed a 8.5% increase in retail sales during the holiday period (November 1 to December 24), with ecommerce sales jumping 11% during that time. Fashion and clothing was the leading category when it came to online purchases.

But, despite its huge opportunities, online shopping is not without its problems for the retail industry: both financially, and also in terms of sustainability, when it comes to waste.

That needn’t stay the case, however. By using smart technology to identify problems and transform their supply chain logistics, retailers can overcome these challenges, save a fortune and also lend a helping hand to fellow high street shopkeepers.

Retail’s two major headaches

While digital commerce is creating lucrative new revenue streams and business models for retailers, the fact remains: nearly one in three online purchases are returned to the depot, costing a small fortune in courier, packaging and reverse logistic costs.

In the clothing and fashion industry returns figures are even higher, climbing to 50%. It’s a problem costing British retailers £7 billion a year and, overall globally, online returns cost the industry $700bn, according to KPMG.

But, it’s not just a financial issue. At a time when retailers need to be more sustainable, research shows that 50% of all online product returns are trashed or sold for next to nothing in secondary markets. Billions of items shamefully end up in landfills because it is simply cheaper to dump returns rather than process and resell them.

In a bid to curb their losses, retailers are starting to charge delivery or restocking fees to discourage shoppers from returning items. However this move could in itself damage online sales, as more than two-thirds of online shoppers expect free returns when  purchases don’t match-up to their expectations.

Unless tackled, it’s creating a downward spiral, for retail profits, consumer prices and the planet.

Smart and circular technology solutions for online returns

But, technological innovations, drawing on the latest advancements in cloud-based computing and artificial intelligence are starting to offer the retail industry new “circular”, sustainable alternatives.

Until now, reverse logistics, a type of supply chain management that moves goods from customers back to retailers and manufacturers, has relied heavily on transportation firms and has often created bottlenecks when goods arrive back at the warehouse, costing them a fortune when it comes to inspection and repackaging. In many warehouses it’s created an overflowing “wall of shame” where millions of pounds of inventory gathers dust and often goes to waste.

However, new click-to-brick returns management software solutions are starting to put a stop to this, by creating smart and optimal returns routing for retail brands.

Instead of relying solely on courier firms, at a time when supply chain infrastructure costs are increasing, new web-based applications can make it easy for online shoppers to return purchases by enabling retail and e-commerce customers to take their goods to nearby approved bricks-and-mortar stores for resale.

Retailers are seeing cost savings and environmental benefits, as the technology intercepts the return and routes it to the nearest, most logical, location. The nearby stores then process, inspect and resell returns locally, helping boost the high street, while reducing the carbon footprint associated with longer transportation journeys back to the warehouse.

There’s added benefit in this. Better inspection technologies and processes also help retailers tackle the growing $30 billion problem of returns related fraud, plaguing the industry.

Tackling environmental challenges by unifying the online and physical retail worlds

While ideally the technology can reroute goods to local highstreet retailers, and therefore cut down on their carbon footprint and waste, the system can also be used to cut costs and associated environmental impacts when transportation is still needed. Whereas retailers often include multiple returns labels when sending out packages to shoppers at the moment, creating a wasteful paper mountain, cloud-based reverse logistics technology can also source nearby couriers and reduce the need for as much labeling.

By having greater data and insight into which items are being returned, retailers are also eliminating further costs and customer dissatisfaction by identifying costly “problem child” products, then either improving or discontinuing selling them.