The value of returns
Al Gerrie, Founder and CEO of ZigZag Global, explores the challenges and opportunities of managing returns around the world.
“Many experts predicted that once brick-and-mortar stores reopened after the pandemic, e-commerce would go back to being the quiet understudy of the high street. That consumers would disregard their new shopping habits, giving up the convenience, vast catalogues, and often cheaper price of online shopping in the process.
That didn’t happen. Retailers and logistics companies simply performed too well for that to happen. After some initial teething issues, increasing capacity to deal with the wave of online orders, consumers were largely left struggling to remember why they didn’t shop online more to begin with.
Physical retail is still king, but each year e-commerce gets closer. At £5 trillion, around a fifth of the global retail market is now made up of e-commerce sales. This is up from around 15% in 2021. The opportunity and size of e-commerce continues to grow, with many experts predicting it to rise by around 50% in the next five years. Both the UK and South Korea have north of 30% of retail sales happening online, with China reportedly as high as 46%.
What that means for returns
With great e-commerce should come great returns. As e-commerce becomes more dominant, returning items is becoming much more common. Our UK survey finds that 47% of those who have shopped online in the past six months describe themselves as frequent online returners, which rises to 67% of 18–25-year-olds.
Returns are a by-product of one of the biggest weak points of the e-commerce experience – the fact that you are buying items without the option of seeing or touching them. Every purchase is a risk for the consumer. This has led to the bedroom becoming the new fitting room. 41% of UK consumers purchase multiple items with the intention of returning at least one of them. This has risen from a third in 2021 and represents a cause for concern for retailers during times of high fuel prices and squeezed margins.
Ultimately, return volumes have never been higher, rising by over 32% since early 2020. In the UK alone, returns already cost retailers an estimated £7 billion every year. As e-commerce sales continue to grow, so will returns and the cost associated with them.
What to expect over peak
Peak season shopping is a hard one to predict this year. The cost-of-living crisis, fuelled by inflation and high energy prices across much of the world makes it a real possibility that consumers will cut back on unnecessary spending this peak season and that the streak of sustained growth in Black Friday and Cyber Monday sales may finally end.
However, it could just as easily mean consumers are hungrier for a good deal. Either way retailers and carriers alike are now gearing up, readying capacity for a boom in orders, and returns, across the next few months.
With online return rates often sitting around 30% for many Asian retailers, Singles Day on 11 November, represents a huge volume of returns being processed over a short period of time. Return rates can climb as high as 60% for some Chinese fashion brands. The potential value of returns heading back to retailers in the weeks following Singles’ Day could reach around £37 billion.
The logistics network needed for a seamless returns experience
When it comes to methods of return, consumers want choice. 45% of customers have stated that having multiple carrier options makes for a good returns experience. But in a world of hybrid working and 24/7 service, what is convenient for one shopper may not be for another.
59% of UK shoppers and 73% of German shoppers often return an online purchase through a Post Office. The sentiment that the Post Office is the most reliable way of getting your goods delivered or returned has emerged stronger than ever, particularly after a tumultuous 2021 peak for retail’s supply chain.
Home collection is quickly becoming a favourite option for consumers. Getting your return conveniently picked up from your home was one of the small luxuries available during lockdown, and it remains a favourite. Retailers rarely offered it as a standard return method option, and it was nearly always accompanied with a fee. Now, for a nation used to working from home, being able to get a collection from home has become the norm.
Finally, a diverse network of drop-off locations including the retailer’s store, convenience stores, and lockers are needed to ensure all customers have a convenient way to get their return back. Whether they want the personal touch of returning at the retailer’s brick-and-mortar store, or they want to make a 4am locker drop off on their way to their night shift, an extensive logistics network is key.
What is expected from carrier services during the returns process?
Buyers are becoming more demanding about communication during returns. Last year only 63% had monitored the progress of their return through a tracking service. In 2022, 83% of people do so, demonstrating that returners are more vigilant.
This is likely to be in response to the increased offering of tracking services from delivery providers, in particular, fast food delivery apps that offer up-to-the-minute order tracking. Monitoring deliveries has become a more practiced behaviour amongst consumers who have become more invested in knowing exactly where their purchases, and returns, are. So carriers need to be able to offer frequent communication to shoppers.
Additionally, consumers are getting tired of printing off their labels. 64% of consumers have requested a paperless return so far in 2022, and the expectation is on the carriers to be able process returns without consumers having to connect to a printer.
The role of the resale and rental markets
The resale market is expected to double in size to $77 billion by 2025. During this same period, the resale market is expected to grow 11 times faster than the broader retail clothing sector. Over half of UK consumers aged between 18 to 35 have recently bought, or are planning to buy, second-hand clothing.
Carriers and retailers both need to be prepared for how an explosion in the second-hand and rental clothing markets could impact their top and bottom lines.
The growing appetite for ‘pre-loved’ clothing opens up another revenue avenue and a second chance for returns to be sold. Retailers can benefit from saving the sale through resale and its perceived good of championing the circular economy. The new but growing rental market has the potential to be a very lucrative business model for carriers. Rentals are naturally 100% returns, so guarantee two deliveries for each ‘sale’.
As rental and resale markets explode, so will the reliance on national postal services. With 64% of consumers expected to sell clothing to other consumers this year, Post Offices can expect traffic to continue to grow as consumers drop off returns and send off their own online sales.
The opportunity of returns
For retailers, returns offer a chance to win sales. 76% of buyers check the returns policy page before purchasing a product online, with nearly half of consumers abandoning their shopping basket and looking elsewhere after seeing the retailer’s returns policy. The sale can be won and lost on the returns policy page.
Returns give retailers the chance to build customer loyalty and showcase themselves as a customer-centric brand. A great returns policy helps to increase purchases, retain customers for longer, and improve brand perception. In fact, 70% of US shoppers say that a returns policy is an important factor in their decision to shop with a retailer. Returns are an opportunity to impress. Offering free returns, long return windows, instant refunds, and live exchanges prove to customers that you value their experience.
For carriers, the volume of returns is mouth-watering. E-commerce sales show no signs of slowing and returns will always be a staple of the online shopping experience. The chance to capitalise on a new, growing revenue stream and increase parcel traffic through your own retailer network is unrivalled. Offering a returns solution for big retail brands already on your service helps protect and build on those relationships.”
About the author
Al Gerrie has over 20 years retail, logistics and e-commerce experience as a former retailer, and was Head of Multichannel at OFFICE and Mountain Warehouse.
In 2015, Al founded ZigZag Global – a fully managed returns SaaS platform that provides retailers with a returns portal for consumers to return goods online, connecting retailers to a global network of over 220 warehouses, 1,000 carrier services, and multiple international marketplaces. ZigZag was acquired by Global Blue in 2021.