Though many retailers have enlisted stricter return policies, the number of consumers sending merchandise back has continued to increase. That’s the finding of a new survey from digital supply chain provider Blue Yonder.
A majority of retailers surveyed (89 percent) reported tightening restrictions around returns, including enacting fees and reducing the return period. But 59 percent said they still saw an increase in returns.
Among the retailers actively working to reduce returns, 42 percent shortened the return window and 36 percent made some items, such as sale merchandise, non-returnable. Adding or raising return fees has been a popular strategy, too. Nearly a third (30 percent) of retailers implemented shipping charges or restocking fees for returns, with 23 percent of retailers adding a stocking fee for the first time. Nearly a quarter (24 percent) increased existing return shipping fees and 17 percent raised existing stocking fees.
Related Stories
Even with those fees, returns can add up for retailers. The cost of returns as a percentage of the product’s original value for retailers ranged from 5-10 percent reported by 32 percent of retailers to more than 21 percent reported by 14 percent of retailers. Apparel ranked among the categories with returns as a percentage of the product’s original value coming in at more than 21 percent.
But for online fashion retailers, returns are an unavoidable part of business, particularly in an age where consumers will purchase multiple items to try on at home, returning the ones that don’t work.
“In certain verticals such as fashion, returns are part of the experience as much as payment,” said Tim Robinson, corporate vice president, Blue Yonder. “The reality is returns are part of the online shopping experience, but that doesn’t mean there’s nothing that retailers can do about it.”
How retailers process returns has changed significantly thanks, at least in part, to Amazon. The retail giant changed the game not only by offering free returns, but also taking advantage of its acquisition of Whole Foods and partnering with Kohl’s to set up return drop-offs that don’t require a trip to the post office.
“Amazon leveraging their own infrastructure with their Whole Foods network as a return point allows them to better manage the cost of returns,” Robinson said. “And with Kohl’s working with Amazon, now you’ve got several other retailers such as Levi’s and Carhartt whose customers can return to a Kohl’s.”
Blue Yonder found that 63 percent of retailers offer drop-off returns at parcel carriers such as UPS or the post office, and 40 percent have return locations within partner stores, like Amazon and Kohl’s. Another 36 percent accept online returns in their own stores, and 23 percent offer return collection from the consumer’s home.
Striking a balance between providing a positive customer experience with returns while also managing costs is key, and Robinson said that to do that, retailers must rethink their approach to returns.
“What’s happening at the minute is we are thinking about returns as it relates to consumers and not necessarily thinking about returns as it relates to the supply chain,” he said.
Robinson said retailers can use tools like the ones Blue Yonder offers to better understand the motivation behind returns to adjust the supply chain to mitigate costs.
“An example would be if you deploy a really slick digital experience for consumers at the point at which they want to return an item, consumers are really comfortable with telling you why they’re returning it, when they’re returning it, and even where they’re returning it,” he said. “You can start to steer some of those supply chain decisions that will allow you to reduce the cost of that return to your business.”
For instance, Robinson suggests offering repair options for damaged items to reduce waste in the supply chain, as well as varying refund timing based on the reason for the return.
“If a consumer has bought three pairs of shoes because to try them with an outfit and they return two, you might not refund immediately because that’s part of the experience,” he said. “But if a consumer’s returning something because it’s damaged, I’d refund immediately because you want to give that shopper the opportunity to shop again as quickly as possible.”
Robinson also said inventory management plays a major role. Gauging whether an item is in high demand and can be resold at full price or whether it’s something you don’t have an urgent need for can determine the speed and cost of return shipments.
“If the former is the case, then we would route that return via a faster, higher-cost carrier to get that item back into stock and refiled as quickly as possible,” he said.
Leveraging inventory data to identify products with a high rate of return can also help retailers to prevent future returns. Robinson says figuring out products that tend to come back damaged or broken, or identifying certain sizes that are frequently returned can help retailers make better decisions about their merchandise.
“If we’ve got SKU x that has a high proportion of return at a size 10, what it’s probably telling us is that that size 10 isn’t a natural size 10,” he said. “So that then goes back into supply chain planning systems and starts to flag that item for merchandisers. The merchandisers can start to talk to manufacturers and think about different decisions.”
Robinson said the biggest takeaway from Blue Yonder’s survey is the changing landscape of returns and how there’s no one-size-fits-all solution for every retailer. And fortunately, the marketplace is innovating to provide retailers with the tools they need to effectively manage returns.
“What you’re starting to see now is a much greater, a more eclectic way in which the consumer can return items,” he said. “There are definitely some interesting things happening in the sector.”
