Returns in online retail: the money is on the road
Online shopping has many advantages. While the selection on the internet seems almost endless, there is one drawback: there is no opportunity to view and carefully inspect the goods before buying them. This means that there is always a risk for both the customer and the retailer that the goods will not meet expectations. The result is a high number of returns. More than half of online retailers have a return rate of at least 10 percent, and for some it is as high as 60 percent, according to a study by EHI in 2016.
This means that 300 million packages with goods are in circulation every year that either don’t fit, aren’t liked, are damaged, or arrived too late at the recipient. For retailers, this is cash money: not only do they miss out on the revenue from the failed deal, but they also can’t resend the goods to another customer during this time. Nevertheless, online retailers depend on returns because they are central to customer loyalty. And greater customer loyalty means more sales. According to the JDA & Centiro Customer Pulse Report 2017, a simple and free returns process is an important criterion for 77 percent of German consumers when choosing a retailer. For some retailers, including Zalando, returns are even a central part of the business and thus an important value proposition for customers.
Less storage space, but also fewer physical goods
A high rate of returns has an interesting side effect: if a large proportion of the products are in transit as returns, less storage space is needed. As soon as the company receives the decision to return the goods, the goods can theoretically be offered for sale again. However, this entails certain risks: the goods may still be with the customer while they are being resold. This delays the sending of the order. So the longer the products are in circulation instead of in the warehouse, the more expensive it is for the retailer. That is why a fast return is crucial in the returns process.
However, this depends on the various links in the process chain. This refers less to the parcel service providers, who can now guarantee short delivery times. In the end, it is usually up to the customer and how quickly they get the goods back into circulation. And this is also the crux of the matter: there is often no time to take the parcels to the post office. It is particularly difficult for working individuals to go to a post office or parcel shop during the week to send returns. With its packing stations, industry giant DHL offers a practical alternative for returns. These are widespread, but not available everywhere. In addition, they are not cross-provider, but a closed system and thus exclusively for parcels that can be sent with DHL.
Who comes to whom?
Some parcel delivery companies also offer the option of picking up returns at home. While this service incurs significant additional costs for regular parcels, it is usually free of charge for customers returning items. However, pick-up is only possible on weekdays – and is therefore not suitable for most working people. Mail-order company Zalando has tested a new model in some German cities, picking up returns free of charge at the customer’s home or a location of their choice. It is still unclear whether this service will be implemented permanently. According to Zalando, customer feedback is still being evaluated.
It is not only in the interest of customers, but also in that of mail-order companies to expand the network of return points. An even more convenient solution for working consumers is to be able to return goods at places where they spend time immediately before, after or during their working hours. For example, at train stations or supermarkets. However, this would require the creation of cross-provider options – especially in urban areas, there is simply not enough space for the respective parcel services to have a comprehensive network of drop-off points. That is why, for example, returning parcels to the workplace is an alternative – just like receiving parcels.
Expectations are rising – for returns too
A digital delivery service makes this possible with little effort and a smooth process. It is a practical option for customers and parcel deliverers alike, and online retailers also benefit from faster returns processing thanks to faster returns. Not to mention the positive effect on customer loyalty. Sooner or later, expectations will continue to rise when it comes to returns, as is already the case with delivery. While customers already have the option of tailoring the delivery process to their own needs as far as possible, the situation for returns is comparatively poor. With the option of posting parcels at one’s workplace or having them picked up at a preferred location, online retailers and parcel services are already going a long way towards meeting their customers’ needs. However, there is certainly still plenty of room for improvement.
Further information on urban logistics can be found in the article “Last-mile logistics in e-commerce – challenges and solutions”.