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Returns are growing challenge

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A recent article in The New Yorker gave vivid detail to something retailers are all too aware of — consumer norms about returning the products they buy have gotten seriously crazy.

The article starts with an anecdote about a friend of the author who ordered six new dresses for an upcoming wedding, planning to send all but one of them back after she tried them on.

This kind of thing has become the norm, with some online apparel retailers saying their shoppers return about 40% of what they buy. And it’s not just online shoppers wanting to try clothes on before deciding what to keep. A lot of people buy things online, use them, and then send them back when they’re done.

“A forest’s worth of artificial Christmas trees goes back every January,” author David Owen writes. “Bags of green plastic Easter grass go back every spring. Returns of large-screen TVs surge immediately following the Super Bowl. People who buy portable generators during weather emergencies use them until the emergencies have ended, and then those go back too.”

The article goes on with stories of people buyng fancy clothing for parties and then sending it back, or returning dead goldfish and dead plants.

The article estimates that the annual retail value of returned goods at nearly $1 trillion. Much of that merchandise ends up in landfills, which is a waste and an environmental disaster. And of course it is also an economic disaster for the retailers involved. Consumers may assume that a lot of the stuff they return is simply sold again to someone else (the dead fish excepted), but that is typically not the case. And it’s not just the cost of the merchandise that goes into the loss column. In many cases the retailer has paid the cost of shipping the products out to the consumer, and will also pay the shipping costs involved in taking it back. Naturally there are processing and handling costs involved as well.

The retail returns problem actually predates the Internet, but it has exploded along with the popularity of online shopping.

That in turn has spawned a new industry, as “reverse logistics” firms work to help retailers cope with the flood of returns without having their businesses and profits end up underwater.

In a recent interview with MMR, Pollen founder and CEO Spencer Kieboom detailed the way his company has created a returns platform that has rideshare drivers pick up packages at consumers’ homes, and then drop them off at a FedEx or UPS facility for shipment back to the online retailer or manufacturer.

Making the return process easier might seem like a counterintuitive solution, with more convenient returns just encouraging consumers to return more goods.

But Kieboom argues that there is no going back to a world before returns, and that retailers that try to do so will see their sales suffer.

“That’s not something I believe anybody can solve,” he says. “Returns are now an integral part of the buying experience, and I don’t see that changing.”

That point is echoed in Owen’s article in The New Yorker as well:

“Despite the cost, retailers worry that discouraging returns discourages buying in the first place, driving revenues down. Easy returns are like free shipping: they can be a deal maker or a dealbreaker when the consumer is deciding where to shop, even though in both cases the cost is ultimately borne by the consumer. Most online mattress sellers free returns, in some cases for up to a year; used mattresses can’t be resold, so the loss, usually some eight or nine percent of sales, is folded into prices.”

Consumers don’t necessarily look at it that way, though, and eliminating free or easy returns means risking losing the sales entirely.

For Keiboom and other players in the reverse logistics business, the best play is to make the returns process less expensive and wasteful, use data to cut fraud where possible, and to speed returns to the point that more returned merchandise can be routed back into the supply chain and made available for resale.

‘So the opportunity then is, A, cut the cost that’s associated with returns, because returns aren’t going anywhere,” Keiboom says. “Because it’s not like you’re going to stop people from wanting to return stuff. And B, getting product that they can return to their inventory and sell it, instead of having to take a loss on it.”

And like anything else in modern retailing, there is data involved in returns that can be mined to help ensure that products can be resold rather than liquidated, and providing insights about what consumers want. Hint: It’s not dead fish.


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