Recently, Electio's Commercial Director Andrew Hill, spoke to the guys over at Logistics Business IT Magazine, and here's what he had to say...
We’ve all been on a journey over the last twenty years, from the early days of catalogues and mail order to the 24/7 on-demand shopping experience that we expect today. The retail offering has broadened and we’re all buying more online than ever before. Logistics has played the ever-quickening game of catch-up against the major retailers, who are able to keep pushing the boundaries of what can be achieved in online retail.
From locker collection to guaranteed pre-9am arrival, innovation has forced us to improve, and as a result, our delivery industry is one of the best in the world. But there’s one last hurdle – returns.
The industry has known for a while that returns are a sticking point for shoppers. A deal-breaker at the point of purchase if convenient options aren’t available, our recent study revealed that 10% of those unhappy with their Black Friday 2015 experience cited a lack of satisfactory returns options as the reason.
And, considering one quarter of all respondents planned to return an item they had bought (rising to 29% for female buyers and 43% for 25-34 year olds), we’re seeing serious investments of time and money into the world of reverse logistics to enable retailers to extract as much value as possible from returned goods.
Balancing the books against customer expectations
Many retailers have started to replace the traditional experience of trying a garment on inside a bricks and mortar store, instead giving customers the option of trying them on at home. When it doesn’t fit or doesn’t suit their needs, the customer can return the item free of charge.
It’s no secret that clothing typically loses a significant proportion of its value when returned. Clearly, the vision for all of us is to reduce this proportion to as low as it can be.
As such, it’s vital for shippers to be completely sure of their ‘Net Recovery Value’ (NRV), which is the resulting value of an item after various logistical costs have been accounted for. The NRV is calculated using this formula – Total Liquidation Revenue + Recycling Revenue - Repair Costs - Processing Costs -Transportation Costs - Cost of Parts = NRV – the figure shows the true cost of returns for retailers.
But the ‘try it on at home’ trend offers a multitude of benefits to the customer, which is why it’s become such a popular way of shopping. Offering this level of flexibility also brings benefits to the retailer, as repeat custom is shown to be much greater when simple returns processes are in place.
Some of the more forward-thinking retailers like Asos and Wiggle offer a choice of collection from home or a variety of drop off locations through Collect + and Doddle. But many retailers still only offer free returns if the customer is willing to take the item back to the local post office, which can be too big a barrier.
Savvy retailers have also invested in packaging that can be resealed instead of forcing customers to locate the bubble wrap. Most despatch notes now include a pre-printed returns label too. These initiatives all help to make returns as easy as possible and are justified by the increased conversion and retention rates.
Who are you dealing with?
Our latest consumer research, investigating shopper behaviours around Black Friday, revealed that while those aged 18-24 were prepared to wait longer for their purchase, they were also much more likely to return goods, with two in five confessing that they may change their mind post-purchase.
It seems obvious, but knowing who is shopping and how they’re shopping has become crucial data for those in logistics. If your offering falls in the bracket above, with 18-24s representing a big segment of your customer base, it may be that you need to invest more money into returns than delivery.
There’s less pressure on you to get items to your shoppers quickly, but they’re very clear in their desire for an easy and hassle-free returns process. And, of course, you want to ensure your recycling revenue is as high as possible otherwise you’ll take a real hit.
Communication is also key. To extract as much value as possible from a returned item, the reason for the return needs to be communicated across the organisation. Was it the fit? Did the customer think it looked different online?
Being transparent and sharing this information will help to drive the whole business forward. Yet, one of the biggest problems retailers face is that they don’t actually know what’s being returned until it turns up in their warehouse, making stock control extremely difficult.
Online returns portals are far more efficient and allow customers to alert the retailer 3 or 4 days ahead of their returned item arriving. This also provides higher quality data capture outlining the reasons an item was returned.
Returns portals are likely to become commonplace in online retail and we’re expecting to see the introduction of customer centric returns apps that consolidate all of a customer’s returns from a variety of retailers into one place with just one return journey.
This will not only be fantastic for shoppers but also a far more efficient solution for the industry.
Some click and collect outlets are also beginning to trial in-store label printing to remove that final hurdle. The crucial question for retailers to answer is who their customers are and where investments would be better made in 2016 – in deliveries or returns.
Either way, we need to stop treating returns as an afterthought. Customers are becoming increasingly aware of what retailers can offer when it comes to returns. The logistics involved in returning an unwanted purchase are only going to become more sophisticated so retailers need to wise up fast to avoid being left behind.