Interviews, insight & analysis on Ecommerce

Glynn Davis: online retailers and the problem of returns

by Glynn Davis, founder, Retail Insider

Online retail was initially a route through which shoppers could purchase goods at a lower price than if they bought them in the retailers’ physical store. The idea was that this would be a way to attract more shoppers to the shiny new world of ecommerce and online was deemed to be a cheaper way to sell goods compared with bricks and mortar outlets.

Online did not have the high rental costs of high street property of course. Nor did it have the wage bills of all those sales people on the shop floor. This thinking was soon recognised as rather flawed because the complexity and cost of fulfilment of online orders proved to be way more onerous than initially imagined. What made this situation worse was that the vast majority of retailers offered their online customers free delivery and also free returns for any unwanted goods.

For much of the retail industry this generous free postage still remains firmly in place. It’s fair to say it has been a massive pain since day one. But despite its margin-killing nature it is the case that most retailers have been incredibly reluctant to slap delivery charges on their customers’ orders. This has also been the situation with returns that are a major bane of the industry and it is estimated that as much as 20-24% of all online purchases are returned to retailers.

What makes matters worse is that while customers will wait in for a timed delivery they are way more lax about hanging around for the collection of returns. At the recent Delivery Conference in central London Chris Haighton, head of logistics at The Very Group, suggests shoppers regard the return as the responsibility of the retailer and so will often pop out and miss the courier assigned to collect their unwanted items. This all adds to retailers’ delivery costs.

But despite this bleak situation Haighton spoke for many retailers when he told delegates that he would not be introducing charging any time soon: “We are not in a position of putting that level of friction in the purchase. We’d like to keep returns free as long as possible. We want to give customers confidence of being able to return items for free.”

However, the mood among some retailers is beginning to change. At the same conference Rachel Troke, senior product manager at New Look, revealed the company was introducing a charge of £1.99 for returns to offset some of the onerous costs involved. However, it is not necessarily all about charging because there are other cute ways retailers can look to lessen the impact of costs involved with returns.

At New Look, for instance, the £1.99 fee will be waived for those shoppers who have bought its annual Delivery Pass for £19.99. The company is also trialling the exchange of returned goods for other items in order to avoid issuing monetary refunds.

Other retailers are also experimenting including Asda with its To You service that offers a seamless collection service for unwanted goods that are picked up by its couriers when out delivering products. The grocer currently offers the service to over 100 brands and retailers.

Growing numbers of retailers – including Asda – are also offering return-to-store options with credits issued in some cases for shoppers taking this route rather than returning goods by post. Drop-off points are not only proliferating in retailers’ stores but also in third-party locations involving the likes of lockers.

Parcel Pending by Quadient smart lockers are being rolled out around the UK and have recently had a printer introduced onto the locker structure from which a returns label can be printed before the package is placed inside the locker. The company works with a number of courier companies, which mean its cost-effective service can be accessed by a broad range of retailers.

As long as margins continue to be squeezed, and the logistics industry pushes through more innovations, then retailers will increasingly seek to offset the onerous costs of handling returns even if in many cases it means they can continue to avoid biting the bullet and directly imposing charges on their customers.


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How do we solve the issues with lockers?

We’ve all seen the banks of parcel lockers that we’ve all seen outside supermarkets and train stations. They are clearly a sensible idea, and one that I’ve been more than willing to use, but I’m very rarely given the option to do so when ordering goods online. Part of the problem, according to Gary Winter, VP of global strategic initiatives for parcel lockers at Quadient, is that they are invariably linked to a single delivery firm – such as Amazon or InPost – and this limits traction.


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