The packages have been delivered, the presents opened and we’re slowly reorienting ourselves back into work mode this New Year. Now, retailers are preparing for a very different annual ritual: the inevitable tsunami of holiday e-commerce merchandise returns.
Each year, American consumers spend freely on themselves and their loved ones over the holidays, only to see many of those items returned once the glow of tree lights and the buzz of yuletide parties fade. According to Washington-based return logistics firm Optoro, a stunning $400 billion in merchandise is returned every year in the U.S., or about 5.1 billion items. Those returns are responsible for generating 15 million metric tons of carbon dioxide and 5 billion pounds of waste, largely from returned garments that end up in landfills across the country.
Why do e-commerce merchandise returns create such a massive carbon footprint? As Optoro notes, the average returned item travels more than 1,200 miles by the time it’s been shipped from a manufacturing facility to a distribution center, to a retailer, to the consumer and then back again. The company estimates that return-related waste could reach 7.8 billion pounds by 2025, with carbon emissions set to increase to as much as 23 million metric tons.
Merchandise returns present a major sustainability challenge for retailers—both e-commerce, brick-and-mortar and those that maintain a presence both online and offline. It’s simply not possible for a retailer to present their business practices as sustainable without mitigating the environmental impact of truckloads of goods being sent back to stores or shipping depots. Those that want to boast their eco-friendly bona fides need to tackle the problem head-on with an effective strategy that takes their operational realities and brand aspirations into account.
Shoppers demand sustainability
Retail business leaders that don’t by in could be left behind.
Reducing merchandise returns is not only essential to maintaining margins and improving their organization’s bottom-line performance, it’s now a consumer expectation. A global 2020 study by the National Retail Federation found that nearly 80 per cent of respondents indicated that sustainability was a personal priority. Of those who valued sustainability the most, more than two-thirds would pay a 35 per cent premium to buy sustainable products. In addition, 57 per cent of consumers would willingly change their shopping habits to mitigate their environmental impact, while 71 per cent are willing to pay extra for brands that ensure full product and material traceability.
Minimizing your return rate
Why are so many products returned? When it comes to apparel, there are several main reasons, including defects, poor quality, inaccurate product descriptions on the retailer’s website or improper fit. When quality assurance is an issue, for example, it’s not uncommon for a garment of the same size but in different colors to fit completely differently. And because you can’t physically touch a garment online, lackluster photography or misleading material detailing can result in significant returns.
In many cases, because a returned garment arrives damaged or has passed through several hands, it can’t be resold or is sharply discounted to well below its original retail price. This less-than-loved merchandise is often relegated to landfill, especially if it’s a premium, tailored garment, which tend to have much higher return rates than lower-priced goods. The simple reason: shoppers who pay more expect full value and to receive exactly what they believe they’ve purchased. If they’ve bought an expensive designer suit online, they demand a perfect fit and/or look. If they don’t get it, they’ll do whatever it takes to return the product and obtain a refund or credit. Opening-price stores (think Old Navy, for example) tend to have much lower return rates given the lower starting price point for their garments.
To minimize your return rate, focus on enhancing the customer experience. Use website photography that showcases the product from every conceivable angle, and in the case of garments, feature close-ups that allow shoppers to get a sense of the item’s material and texture. Next, be smart about the product description. Does it fit large, small, true-to-size? Assuming it’s being worn by a model, does the image (and real-world fit) properly reflect the product?
Investing in a robust CRM system and helping customers make better product choices—using predictive analytics and data based on their past buying history—will also help mitigate your return rate and prevent it from getting it out of control.
In the end, becoming a more profitable, sustainable retailer comes down to strategic management decisions. If you and/or your team aren’t constantly focused on improving the customer experience and adopting new tactics to minimize merchandise returns, the problem will continue to grow.
The real KPI shouldn’t just be the dollar value of the product that leaves your online store, but also the percentage of products that come back—and how that cycle impacts the planet.
Scott Polworth, founder and principal, SFP Solutions
