Where tech can smooth out the retail returns process

Written by Ainnie Allen

Fashion retailer H&M started to charge customers for online product returns in September 2023. Citing a rise in delivery and processing costs, as well as growing consumer use of free returns, H&M slapped a £1.99 fee on customers looking to return their online orders via courier.

New Look, too, revealed earlier this year it was trialling a charge for returns, following in the footsteps of Boohoo and Zara which made the decision in 2022 to impose a fee on shoppers sending back items they did not want to keep. The likes of Next, JD Sports, and Uniqlo have charged for online returns for years.

The decision by more retailers to take away free returns – which for many of them has been a perk to encourage customers to make a purchase in the first place – shines a light on the costly process of managing them. It is also fuelling the technology and supply chain industry to innovate and find solutions, which aim to save retailers money and curtail the rising environmental footprint associated with returns.

Certainly, the cost of handling reverse logistics is something retailers could do without in a challenging economy. And, with many retailers struggling to get returned products back on sale, these items can contribute to business waste and do not support their strategies related to environmental welfare.

Sizing calculators and digital avatars

The British Fashion Council’s (BFC) Institute of Positive Fashion, alongside supply chain company DHL and consultancy Roland Berger, published a report in March 2023 which assessed the cost of returns both to businesses and the planet.

According to Solving Fashion’s Products Returns, the UK fashion industry lost at least £7bn in 2022 due to returns, while UK returns were estimated to generate about 750,000 tonnes of CO2 emissions. Some 350,000 tonnes of this figure reportedly came from reverse logistics processes.

The BFC report arguably goes further than anything before in terms of offering solutions to the returns conundrum in retail. It is supported by consultations with multiple players from the fashion industry, including representatives from Tesco, Mulberry, and Primark, as well as those at the forefront of pushing UK fashion to become more circular in its thinking, such as clothing rental platform ACS and NGO Wrap.

According to the report, incorrect sizing or fit (93%) and product quality not meeting expectations (81%) were the top reasons for returning goods. Some 56% of shoppers questioned for the research said a charge is the measure most likely to prevent returns. It added that product returns are mitigated at the point of sale and the onus is on retailers to help consumers make “the right choice, the first time, every time”. From a technology perspective, the report urged retailers to enable consumers to buy correctly by leveraging data and digital solutions.

Advanced analytics solutions “to truly understand the causes for returns and how to reduce them in the most effective way possible” are available – and should be considered by retailers in their quest to solve this challenge, it suggested.

The data piece is about creating transparency across the industry, meaning all stakeholders have a clear view of their emissions at each step of the product journey, including the returns process. It is only once this is in place that retailers can start improving their performance, according to the report.

Technology for prevention and cure is required to stem returns, with the BFC and its partners arguing sizing calculators will become an industry norm and digital avatars an integral part of the future for fashion retailers. Roland Berger says large retailers with approximately 70% of sales coming from their website, could reduce cost of returns handling by 20-40% with the introduction of sizing calculators and avatars.

Investing in technologies and processes, such as digital product passports and automated warehousing, “so that businesses can make returns operations more efficient, cost-effective, and less carbon intensive”, is also deemed crucial.

BFC CEO Caroline Rush says the project on which the report is based “recognises the importance of investing in innovation to secure robust and profitable businesses, while safeguarding the planet and society”.

Supply chain tech

With H&M et al starting to charge for returns, it is clear retailers realise there are different levers they can pull to try and stop the problem at source.

But clearly more work needs to be done if they want to drive down returns. Next reported in 2022 that 42% of online sales are returned, while online fashion brand Sosandar estimates future revenue with the assumption of a 45% returns rate.

Natalie Berg, retail analyst and founder of the NBK Retail consultancy, says retailers, who are already providing “the stick” for customers by charging for returns might need to find “the carrot” to incentivise greener behaviours.

Talking at supply chain software provider Manhattan Associates’ Exchange 2023 event in Cannes in October, she suggested this might take shape in the form of rewarding shoppers for making greener delivery choices.

Where these incentives stop is up to the industry. Knowing returns are such a significant drag on e-commerce profitability, perhaps they might reward shoppers who return the least items – either way, there is an education process customers must go on, Berg says.

“I think it’s because there is no awareness of how their actions impact retailers – there’s no transparency,” she explains.

Berg was reflecting on why, when asked about their most important factors in online delivery, most consumers selected convenience but only 8% cited the environment.

Those statistics came from a Manhattan survey of 6,000 consumers published on 10 October as part of a wider annual industry study, which helps shape its tech roadmap.

In Cannes, delegates were told about several new technology releases from Manhattan that could help retailers get a handle on returns.

Brian Kinsella, senior vice president for product management at Manhattan, says: “We’ve made some investments in the last year or so, which really allow the customer – after they click submit on their order – to take full control of it.”

Describing this as “customer-controlled fulfilment”, Kinsella says retailers with Manhattan Active Omni technology embedded in their commerce platforms can provide a post-purchase window for customers to change delivery address, quantity or pick-up details. They can even cancel their order if they change their mind, which Kinsella claims could cut down on unwanted purchases and, therefore, returns

“If you’re a direct-to-consumer business we will allow your customers to participate actively in the fulfilment lifecycle of their order,” he says.

“When it comes to anything store pick-up related, giving customers the ability to participate more actively improves customer satisfaction and lowers return rates. We think it’s important because any time you can reduce a round trip in terms of a return or exchange it takes a lot of cost and carbon out.”

Kinsella acknowledges Manhattan’s technology – built on an “API-first architecture” – does not primarily exist for sustainability reasons; it is to optimise supply chain management with the consumer in mind. But he recognises business efficiency and sustainability go hand in hand.

“You have a high degree of alignment between taking cost out and becoming more efficient and reducing carbon footprint and improving sustainability,” he says, explaining how its transport management systems aim to allow retailers to move goods with as few miles as possible and its yard tools aim to ensure retailers fill containers optimally.

And this is true in the returns space too. As well as the customer-controlled fulfilment, retailers using Omni can direct returns more efficiently, according to Kinsella.

“A lot of enterprises today blindly send everything [all returns] to one location which – when received – are handled and transported again. Why not identify where that inventory is needed right now and have it go to the store, [meaning] fewer miles travelled and the store needed it anyway?”

Reverse logistics M&A

Manhattan competitor Blue Yonder announced, on 12 October, its intention to acquire London-based logistics company Doddle. Blue Yonder says with Doddle’s pick-up, drop-off capabilities, which includes in-store returns kiosks, it will be able to offer retailers a “much-needed solution to today’s returns management challenges”.

Duncan Angove, CEO of Blue Yonder, claimed at his business’s ICON London conference that Doddle has managed to achieve “what few other companies have been able to accomplish” by combining first and last-mile and omnichannel returns.

He adds: “The beauty of Doddle’s solution is that they solve the returns problem end-to-end. From returns initiation, to returns rules, from in-store returns processing to self-service kiosks, right through to warehouse returns handling and back into stock.

“The proliferation of e-commerce – and, therefore, returns – has placed increased pressure on carriers, muddied the waters of inventory management, and created frustrations for shoppers. Doddle’s capabilities unlock a differentiated, superior customer experience and will help us to further our mission to transform the supply chain.”

Returns management capability has been a central part of much of recent supply chain sector merger and acquisition (M&A) activity. In 2022, GXO talked up Clipper’s reverse logistics offering when completing the acquisition of the latter.

It is a pertinent issue, and as Kinsella explained at Exchange, retailers require a different mindset in a digital commerce world due to consistently high returns rates.

“The biggest supplier most of our customers have is actually their customers sending stuff back to them,” he says. “So, why not think about that flow of goods and how to best optimise that?”

About the author

Ainnie Allen

It's me Ainnie Allen, the talented individual behind this captivating blog, is a remarkable young talent at just 25 years old. With an impressive five years of experience in the dynamic world of blogging, I have honed my skills to perfection. My passion for writing and dedication to my craft are evident in every word I pens. Through my blog, I have share my unique insights, knowledge, and experiences with a keen audience, leaving an indelible mark in the blogging community.

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