April 27, 2016 Opinion piece
A recent study 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 quite simply charge for them. The same study found 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 cost for return shipping.
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 is dependent on whatever a 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, taking it to a drop off point or returning to store. With all of these options at the customer’s discretion it’s difficult for a retailer to manage the costs.
Once a return is with the courier, 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. Consumer’s value transparency in 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 is often the first time they realise its coming. This means that it can often be difficult to effectively plan resources for processing returns. With the exception of peak periods – the first week of Jan, 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 find returning items to be complicated and 30% difficult.
And for the retailer? Apart from the fact it costs too much, 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 for the consumer, more transparent and better control costs.
After a series of workshops including leading retailers and logistics suppliers, GS1 UK have devised two key areas that would greatly improve the reverse logistics process.
Returns Management Authorisation (RMA)
The first difference, 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 currently facing consumers.
An RMA process allows consumers to notify the retailer that they’re returning something and how they are returning it. Through the portal retailers could guide and incentivise shoppers to use more cost effective or appropriate returns routes. And with a couple of days’ notice, better plan their resource allocation for dealing with the returns on their arrival.
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 would be able to give preference to those that are priority customers or exhibited good returns behaviours 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 channel the use of a single tracking code that can operate across all channels provides significant advantage.
GS1’s core business is unique identification, and retailers have long used Serial Shipping Container Codes (SSCCs) to track shipments in their supply chain. Essentially this is a number that tracks a shipment of any size. This already existing industry standard can be applied to help retailer’s better track the reverse logistics process. Keeping their customers informed of the key milestones throughout the journey.
Try a better way
Following on from the workshops that GS1 UK have hosted, we are now looking for retailers that are looking for a better, more cost effective way 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.