Let’s face it, most of us don’t give a second thought to ordering shoes in two sizes and returning the one we don’t want. Imagine the amount of products that are ending up back the hands of the retailer. Managing these returns is a very complicated process, and in fact, it’s also an environmental burden. That’s because sometimes it’s more economical for a retailer to just throw away perfectly good items.
About 8 percent of in-store purchases and 25-30 percent of products sold online are returned. That number can be as high as 40 percent for clothing and footwear purchases. These numbers represent about a 34 percent increase from 2010, according to the National Retail Federation. Every year about 4 billion pounds of returned merchandise ends up in landfills. That burden equals about 11 million metric tons of carbon emissions every year. The growth of e-commerce and free shipping means these numbers will likely increase.
Having systems, warehousing, and people in place to manage returns is expensive. Free shipping, damaged items, and products that are past their peak-selling season are all part of this costly business function. Returns costs retailers about $260 billion every year.
The problem for retailers is how to manage returned products. Where do these products go when we send them back? Traditionally, retailers would put the goods back on a warehouse shelf, where they might be re-purchased – or sit for months before being thrown away. But this traditional model is not feasible any longer; with increasing returns comes increasing costs of maintaining inventories.
Today, companies are looking to something called reverse logistics for better solutions for reducing the losses associated with product returns. Reverse logistics is the backward flow of products after they have been sold. The aim is to recapture some of the value through reselling, refurbishing, or remanufacturing. Reverse logistics companies like Optoro, Return Logic, and Genco are trying to help companies manage returns in a more sustainable way. Reverse logistics aims to get products back into the market by minimizing time and waste.
- Optoro has developed a returns management system that takes product information and determines the best option for resale. Their technology uses secondary market information and past sales data to manage inventory. They have both a consumer-facing site (BLINQ.com) and a site for resellers (BULQ.com). They also work with many online retailers.
- Return Logic has a tool to analyze returns. It detects trends and identifies specific issues with individual SKUs. Identifying root causes like product mislabeling or mistaken shelf locations in the fulfillment operation can prevent future returns.
- Genco has reverse logistics software that is increasing the efficiency of returns processing and has improved margin recovery by up to 20 percent. They have created business rules that determine the appropriate product disposition method. The way a company uses this data is also important in preventing returns. For example, Soft Surroundings, a women’s apparel company, is trying to improve their products by collecting data on the reason for return. They analyze this data to make design decisions and create a better product with fewer returns.
Of course, the best option would be for customers to get the right item in the first place. Companies with good customer service can prevent returns. Getting to know customers’ preferences and offering the right items can increase satisfaction and decrease returns.
Chat: Many companies have included chat capabilities on websites. A chat function saves me time and gives me the information I need to make the best purchase.
Reviews: Offering product reviews is another way to help customers. A review might tell you if an apparel item runs small or if an electronic device works the way you want it to.
Shifting purchasing behavior is a large driver for more sustainable purchasing. Ordering the right item at the outset, and buying used, recycled, or remanufactured products, can have a big impact on the environment. If we all shift our thinking on how we consume, we can significantly reduce waste and conserve resources. Take the time to make an informed selection! Look at second hand and recycled products first!