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eCommerce and Returns: Challenges for Retail and Logistics

Bring It Back

Everyone knows that the weeks leading up to Christmas are more than busy for online merchants and parcel services. However, the time after the holidays is becoming increasingly challenging as well, due to the constantly growing number of return shipments. We’ve taken a closer look at the problems caused by the increasing rates of online returns and evaluated a few possible solutions.

The USA is known as a trendsetter in regard to Christmas shopping, and the country’s yearly shopping frenzy is traditionally followed by a surge of returns. During the holiday season of 2017 alone, US consumers returned 90 billion US dollars’ worth of goods – by 2021, this figure had already risen to a staggering 158 billion US dollars. The past ten years have seen a strong shift from brick-and-mortar trade to e-commerce which has affected not just purchasing habits, but also returns, resulting in a variety of new challenges for merchants and logistics providers.

Just send it back: decreasing inhibitions

Customers have the right to closely inspect a product before they decide to make a purchase – this is true for stationary trade as well as online shopping, and it results in the right to return unsatisfactory goods. Since more and more online merchants have been offering free returns, consumers have been putting this right to increasingly massive use. On average, approximately 30 percent of goods ordered online end up being returned. In the fashion segment, this number is significantly higher: German online fashion retailer Zalando reports that about half of all goods ordered from its website are consistently sent back.

This ‘culture of returns’ has occasionally taken on absurd proportions. According to a survey conducted in the United Kingdom, almost 10 percent of all clothing items are bought solely with the intention of taking a picture for social media – after posting on Instagram and the like, the item is simply mailed back.

Accepting returns: not always worth it

For online retailers, the booming e-commerce business doesn’t only mean more revenue. The high frequency of returns comes with a hefty load of administrative effort, with the costs of a return shipment averaging at around 10 euros for online merchants. What’s more, only about 70 percent of returned goods can actually be resold as new. In the case of certain products, merchants have even stopped asking customers to return items they’re unsatisfied with, they simply replace them instead.

The main reason for the high costs of returns management lies in the administrative effort involved in examination, inspection and quality control. Clothing has to be checked for signs of wear, electronic devices need to be tested to make sure they’re still working. Postage is another important factor, as three-fourths of merchants today choose to bear these costs for their customers. Although return shipments incur a significant amount of additional costs, online merchants are under pressure to make these as easy for their customers as possible. After all, a smooth returns process is essential for customer satisfaction, and a happy customer is more likely to shop again.

The relevance of e-commerce, and with it, the demands for streamlined reverse logistics, have grown – not just in B2C, but also in B2B. Manufacturers need intelligent systems to enable automated supplier management, fast reactions to changing conditions and ultimately, an efficient way to manage returns of spare parts and components.


Solutions for consumers, retail and logistics

To reduce the manual effort of returns processing, a growing number of retailers and logistics companies are making use of intelligent sorting facilities which can unpack, sort, check, repack and forward goods within minimum time. The machines available today are highly sophisticated and can vastly reduce the required man hours. However, the transport costs remain.

Merchants who have a sufficiently strong network can circumvent costly individual return shipments, or at least make them more efficient, by using return hubs – which can also serve to simplify the returns process on the consumer’s side. In 2017, US supermarket giant Walmart took further steps to make it easier for its customers to return goods. With ‘Mobile Express Returns’, customers can initiate the return process in just a few steps via the Walmart app. Then, all they need to do is drop the item off at a Walmart store of their choice. Since 90 percent of all US-Americans live within 10 miles of a Walmart outlet, this has helped minimize transport costs.

But why not take it a step further and tackle the problem at its source? One main reason for the high rate of returns is the lack of a possibility to inspect and compare products first-hand. Thus, online merchants can effectively prevent returns by providing as much information as possible on their web portals. In addition to detailed product descriptions, many online shopping websites now provide 360-degree pictures, videos or customer support via live chat. The German company Avalution even goes a bit further with the help of virtual reality. The company’s software uses body scanning to create a ‘virtual twin’, which can be used to try on clothes directly at the online store. Despite the differences in these approaches, they each require a solid technological basis – whether it’s automated sorting, return hubs or virtual fitting rooms.

B2B requires smooth returns processes too

The relevance of e-commerce, and with it, the demands for streamlined reverse logistics, have grown – not just in B2C, but also in B2B. The manufacturing industry, for instance, increasingly depends on making beneficial use of interfaces between suppliers and manufacturers to optimize processes and avoid unnecessary trips and downtimes. Manufacturers need intelligent systems to enable automated supplier management, fast reactions to changing conditions and ultimately, an efficient way to manage returns of spare parts and components.

Whether it’s private customers, online merchants, manufacturers or suppliers: e-commerce always runs in two directions. With the rising frequency of these goods flows, all players are faced with a range of new challenges. The demand for creative solutions is met with an equally vast array of innovations. Key factors such as automation, transparency and intelligent data management will continue to play a large role in the success of these innovations in the near future.

E-Commerce: more than just Fulfillment

Looking for flexible, scalable and affordable logistics services for your e-commerce business? With our all-round e-fulfillment services, we provide a cost-effective solution for your shipments all around the world: from warehousing and overseas transport up to last-mile parcel services. 

Our flexible pricing models help you minimize fixed labor and inventory costs, saving you both time and money. All processes are supported by our state-of-the-art online tools to give you full visibility and control at every step.

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