It’s a fact: the boom in online commerce coupled with the rise in transport prices has profoundly transformed economic models. The economic and ecological impact of returns in the value chain has become a strategic subject for E-merchants. Long used as a lever of conquest, free returns are no longer popular.
By Laurent Jeaneau, Director Supply chain & Digital Solutions and Lancelot Mauny, Senior Consultant Business Excellence & Supply Chain, at TNP Consultants.
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Yes, the “try it, buy it later” seduces en masse
A real business facilitator, free returns have clearly made it possible to democratize online sales, a channel that currently covers 20% of retail sales. Zalando’s winning strategy of “Try it, buy it later”, allowing non-preserved products to be returned free of charge up to 100 days after purchase, has long been valued as a reassuring argument for the customer.
As the volume of online purchases has exploded, the number of returns continues to grow. It is estimated that on average 10% of sales are returned, this figure can represent up to 30% of the volume in the textile sector, according to the Ministry of Economy and Finance. A trend that would represent more than 150 million products returned to France in 2021.
But in full evolution, the sector is reviewing its copy… and rightly so.
Expensive and irresponsible
The conclusion is clear: free returns are expensive. A return costs today, between 12.5€ and 20€, per package. According to a study published by OpinionWay, €7 is directly linked to transport, the rest being shared between packaging and logistics costs. And that’s without taking into account inflation and the rise in transport prices, which are likely to continue to impact the profitability of e-merchants and increase these costs. To this is obviously added the cost linked to defective products which will be sent back to a specialized circuit to be destroyed, transformed or sold on channels dedicated to second-hand goods, if they are for example considered to be already doors. And there too, the overcost explodes.
Even more, responsible consumption goes hand in hand with responsible purchasing. No more returning a product to the other side of the world following a compulsive purchase. These habits are no longer acceptable. The empowerment of companies and customers is becoming a strategic point of CSR policies. The duty to measure and then inform the impact of each action has become a priority in the reputational issues of companies. The customer reserves the choice to adopt virtuous behavior but the company must offer him more economically responsible solutions.
In this regard, the AGEC law imposing that unsold non-food items no longer be destroyed tends towards this incentive for responsible consumer behavior. According to a study by the Technical University of Delft, the majority of respondents declare themselves neutral to a return fee of up to €5… provided that this is a legal obligation. Therefore, a law imposing a universal return fee would be welcome to drastically limit returns.
Towards a crucial transformation of the model
It is urgent to transform the model, to optimize and limit the return flows. Of course, it is not a question of diverting consumers from the online shopping mode, for whom the return is a decisive subject.
In fact, 77% of e-commerce site customers say they will only place orders if e-merchants offer a quick and easy way to return products without hassle.
80% of e-consumers say they will stop ordering items online if it requires them to bear the full cost of returns.
A system integrating several distribution channels will have to see the light of day, whether it is a return to a relay point (52% of customers say they are ready to adopt this channel) or a home collection service (27% would like to benefit from this service).
To meet this need, some E-merchants have already anticipated this transformation under the guise of CSR policies. Among them, Zara, H&M, or even Uniqlo have already set up a return fee ranging from 1 to 4 €. And for its part, Amazon has decided to increase the price of its PRIME subscription.
To meet this challenge, we must quickly reinvent the customer experience in a competitive and global market. All this, taking into account the constraints imposed by these consumers and their consequences in the company’s supply chain organization as well as the logistical solutions to be deployed to respond to them.