The continued surge in online shopping will see over £2.5billion of unwanted Christmas presents returned to retailers this year, with the majority returned between mid-December (following Black Friday) to mid-January.
These figures are estimated by LCP Consulting, a BearingPoint company, that works with many of the top 10 UK retailers. LCP says that returns are one of the consequences of the growth in online shopping as distance selling regulations require retailers to offer a returns service to remove the risk of shopping remotely.
Stuart Higgins, director – retail, at LCP Consulting, a BearingPoint company, said: “The price retailers have to pay for online growth is pretty substantial. Not only will this flood of returns put additional demands on retailers back-end operations during their busiest online sales week of the year, it will also impact their stores as a third of returns will come back into stores just as they’re launching their Christmas and January sales.”
LCP highlights that it’s not just the cost of receiving the return that puts additional strain on retailers, there are four other factors which have an impact:
- Cost of an online order – An online order typically costs £2 to £3 more to process than an in-store purchase. This investment by the retailer to encourage online sales will be lost if the customer returns the goods.
- Free returns – The High Street standard is now to offer free returns – great if the consumer walks the item back into a store, but not if the retailer pays a carrier to collect the parcel from the customer’s home, or if the customer posts the item back at the retailer’s expense.
- Making new – Each return has to be processed by the retailer to check it’s in a ‘as new’ condition and can go back onto the shelf for resale. A fashion garment may need creases steamed out, and Electrical items need to be safety tested.
- Not fit for resale – Some items will simply not be fit for resale and will have to be either discounted or scrapped altogether – further adding to retailer costs.
Why customers return…
Customers return items for a variety of reasons including; the wrong item was purchased, the product is no longer needed, the product didn’t match its description, a gift purchase was incorrect, the product was damaged on arrival, or the retailer shipped the wrong item. Another reason is that the customer engaged in ‘wardrobing’ – where they buy an item (e.g. a party dress) for a particular purpose, uses it, and then returns it for a full refund.
Higgins said: “Most retailers do not want to publicly accept that wardrobing happens, but it is a reality they have to deal with. At this time of year wardrobing can be seen when a party dress worn for the office Christmas party is returned. It is virtually impossible for retailers to prevent wardrobing, but some are starting to make inroads by using data and analytics to identify repeat returns in order that these customers can be prevented from ordering in future.”
LCP says that to improve the efficiency of returns, successful retailers are implementing:
- Returns-ready packaging
- Returns labels in original package
- Easy drop off/collection points
- Credit on first scan, not after the retailer has processed the return
Higgins added: “Retailer returns processes are improving, but our annual survey of leading retailers continues to highlight that returns speed/efficiency ranks less important in the minds of retail directors than other supply chain factors, which is surprising given that 70% of consumers say that returns capability is top of mind when selecting where to buy from online.
With online returns exceeding £2.5billion from this year’s festive shopping period, forward-thinking retailers need to ensure that they’re operating fast efficient, customer-centric returns processes so customers get their cash back faster – an important part of over customer satisfaction.”