Perfecting returns: the missing link in Omni-Channel

Online sales for non-food items continue to rise. British Retail Consortium numbers for 2015 suggest an overall increase of 15 per cent, and in some sectors on-line sales are starting to overtake brick-and-mortar sales.

But with the rise in sales, we are also seeing a huge increase in the levels of returns. In itself, that should not come as a surprise. Catalogue retailers, the predecessors to on-line retailing have always experienced high return rates; these vary by product but can be in excess of 50 per cent of total dispatches.

Returns have a key impact, in three very different areas:

• Customer experience

• Operational consequences

• Financial returns

From a customer experience point of view, our recent research, The Omni-Channel Journey, shows that 7 out of 10 customers rate return service as “very important” to their journey. One key disadvantage of on-line retailing is that the customer can’t touch and feel the product. Customers consistently tell us that the ability to return products is critical because they don’t know if they will like the product. This becomes especially important for items like fashion, where the exact colour and fit are difficult to convey on a screen.

However, our report also highlights that many retailers fall short on this element. Only 28 per cent of the retailers we surveyed recognised “managing returns as seamlessly as we manage sales” as one of their top-three factors. In most cases, returns are seen as a necessary evil rather than a critical part of the overall customer journey. It is worth remembering that customers don’t want to return products, they do it because they are in some ways not happy with the product. 

Key elements to consider are:

• Returns-ready packaging

• Returns labels in original package

• Easy drop off/collection points

• Rapid credit (e.g. on first scan, not after the retailer has processed the return)

From an operational perspective, returns typically are very time consuming, and therefore costly. They are notoriously difficult to plan, enter the operation in a number of different ways, and typically need some level of checking and processing. Best practice operations have returns processes designed into the overall flow and have a dedicated team, specialising in:

• Rapid assessment of the product – can it be resold, does it need rework or what would be the best way to recover some value if it is beyond repair

• Repackage and resort

• Get the product back on sale

And finally, from a financial point of view, returns are a direct hit. It would not be untypical for returns to cost two to three times as much as the original pick and despatch operation. Then there is the cost for transporting the parcel twice, and the potential rework cost to make the product fit for sale. And finally the worst part of it – all these costs are incurred without any revenue!

On products with short life cycles there is the additional risk that the product value decreases during this time, putting a real focus on processing the returns back to stock (and hopefully sales) as quickly as possible.

It is clear that returns are a vital part of the overall process. Customers understand this, and are specifically highlighting it as a critical part of the overall journey. From a financial point of view, it makes perfect sense to design the process properly and minimise the costs and the risks to obsolescence.