As online shopping has seen exponential growth, so too has the volume of items returned, especially clothing. Free returns are part of what makes online offerings attractive, but there is a downside: nearly two thirds of online customers order a range of sizes, styles and colours with the intention of keeping only one or two items. So, while in-store shoppers return between 5% and 10%, about 40% of items ordered online are returned.
For retailers, adding returned items back into inventory may be neither time- nor cost-effective. Returned goods have often missed the season, or are badly packaged, damaged or slightly soiled; and they tend to be sent back to a different location. The result is that only 50% of returned products end up back on the shelf to be sold.
The challenge is exacerbated for smaller businesses which may not have the capacity nor the cashflow to manage the costs of packaging, warehousing, return shipping, processing of returns and associated payments, cleaning, repairing, etc.
So online retailers are in a bind. A negative returns experience will deter up to 89% of buyers from becoming repeat customers.
THE ENVIRONMENTAL BURDEN
Returns negatively affect the environment in three broad categories:
- Pressure on landfills (in the US, 2.2m tons of online returns end up in landfill);
- Carbon footprint (US figures: the equivalent of 3m car emissions are created annually through return shipping); and
- Increase in the amount of packaging per order.
WHAT’S THE OPPORTUNITY?
Retailers’ creativity in terms of solving this problem tends to be centred on saving costs rather than the environment. However, entrepreneurs are starting to see the possibilities: Optoro, a returns optimisation platform, is the first to have identified and jumped into one of the gaps.
South Africa’s socio-economic environment presents many opportunities. Any thoughts?