A recent study by JDA Software and PwC placed returns as the second highest cost factor for omnichannel fulfilment. Surveying over 300 CEOs from large retailers, 63% of them placed returns as one of the top three cost factors. Yet, the same report didn't identify returns as an area for investment – with only 2% selecting an unidentified 'other'.
One way to deal with the rising costs related to returns is to charge for them. The same study found that 24% of CEOs were considering this option. But the immediate question is how realistic is this? Especially when consumers value free returns, with a UPS study finding that 55% of consumers would not complete a transaction when faced with a shipping cost for returns.
The situation
A return by its nature starts with the customer. And the customer doesn't have systems in place to manage a logistics process – they don't even have a methodology, they go with what seems easiest and most convenient at the time. The resources to start the process are dependent on whatever the retailer provides them with.
In most instances the customer will receive a label and some instructions with their product that will outline how they can return the product. Generally this would be by organising a courier to collect it, taking it to a drop-off point or returning it to store. With all these options at the customer's discretion it's difficult for a retailer to manage the costs, let alone know what products are being returned.
Once a return is with the (third party) parcel carrier, the return will then be transported to a retailer's central hub. This part of the journey is critical in the customer's perception of the process. Consumers value transparency about when their return parcel has arrived with the retailer and when it has been processed – and thereby releasing their refund.
For the retailer, when the return turns up it's often the first time they realise it's coming. This means it can often be difficult to effectively plan resources for processing returns, with the exception of peak periods – for example the first week of January, which includes what Royal Mail this year dubbed 'mail back Monday', the busiest returns day of the year.
So how's that process working for the consumer? Not great to be honest, 51% of them find returning items to be complicated and 30% find it difficult, according to Metapack.
And for the retailer? Apart from the fact it costs too much, Gartner research shows that only 48% of the stock gets back on sale to be sold at full price.
How can we improve?
By adding some structure we can make the process more consistent, more transparent and better control costs.
After a series of workshops including leading retailers and logistics suppliers, GS1 UK has devised two key areas that would greatly improve the reverse logistics process.
- Returns Management Authorisation (RMA)
The first difference, which is already in use by some retailers but would benefit from some standardisation, is the use of an RMA process. With a consistent portal for consumers to use, retailers can reduce the level of confusion that consumers currently face.
An RMA process allows consumers to notify the retailer that they're returning something and how they are returning it. Through the portal, the retailer then could guide and incentivise shoppers to use more cost effective and appropriate returns' routes. And with a couple of days' notice, better plan their resource allocation for dealing with the returns on their arrival.
With resources more effectively allocated and visibility of what's coming in, retailers can be better placed to get stock assessed and ready for sale – ensuring they can maximise the resale value of their items.
Consumers would also benefit, as retailers could give preference to the priority customers or those who exhibited good returns' behaviour previously. This could be in the form of a quicker or even instant refund – the ultimate crowd pleaser.
- Universal tracking code
The most efficient way of working across channels with transparency is to remove the barriers. So to ensure that items can be tracked across the various channels, using a single tracking code that can operate across all channels and across international borders provides significant advantage.
GS1's core business is unique identification, and retailers have long used Serial Shipping Container Codes to track shipments in their supply chain. Essentially this is a number that tracks a shipment of grouped or unitised products. This existing industry standard can be applied to help retailer's better track the reverse logistics process and keep their customers informed of the various key milestones throughout the journey.
Try a better way
Following on from the workshops that GS1 UK has hosted, we are now looking for retailers that are considering better and more cost effective ways to manage their returns process to get in touch. If you'd be interested in being part of our proof of concept please contact apparel@gs1uk.org to find out more information.
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