Rising tide of returns

WITH THE likes of Zara and Next now charging shoppers to return items by mail, delivery broker ParcelHero says we’ve reached a tipping point, and soon there may be no free returns.

Zara says returns have been costing UK retailers around £60bn a year. One in three fashion items purchased online are now sent back. As the Covid online shopping bubble begins to deflate, ParcelHero’s David Jinks says free returns are no longer sustainable.

“Most online retailers admit the cost of free returns gobbles at least 13% of their annual profits. Zara (£1.95 per return), like Next (£2.50 per return), won’t charge customers who return things to a physical store, but will charge for the use of pick-up points.”

Other stores have also started charging for returns. For example, Uniqlo introduced return charges in March 2021. Its returns, via Evri ParcelShop, cost £2.95.

David adds: “Shoppers have had a good ride with free returns, but they are becoming too much for retailers to absorb.”

Yet, Stuart Higgins, partner at BearingPoint makes the argument that any retailer that eschews free returns could find itself haemorrhaging customers faster than it can afford to.

“For retailers, returns add complexity and cost to mobile, online, and in-store trading, threatening profit margins, but retailers also struggle to drive turnover and market share,” he explains.

“Our research shows that around 70% of customers now use the ‘returns offer’ as a major factor in deciding who to shop with. The problem is, many retailers still see returns as an unfortunate by-product of trading online: a necessary evil to be tolerated in pursuit of growth, not part of an integrated and seamless customer offer.”

The highest proportion of returns are typically experienced within the fashion sector, where garment fit is key to customer acceptance. The customer needs to be able to try on the garment in the comfort of their own home and return it if the fit isn’t quite right. This can typically mean customers ordering two or three sizes of the same garment and returning all but the best fitting item. 

Higgins continues: “To reduce the level of returns, some retailers are experimenting with ‘virtual changing rooms’ where augmented reality tools are used to enable the customer to picture themselves wearing the garment as part of the ordering process, but it is still very early days for this technology, and it will be a number of years before it is widely adopted in online retail.”

There is no ‘standard’ size profiling for fashion retailers. To overcome this, some websites offer the customer the ability to input their own measurements and get recommendations of which size will be the best fit across multiple different brands.

Primark

But ongoing problems with returns and online fashion sales are not a deterrent to future growth of the market. Indeed, Primark has long concentrated on bricks and mortar retail, but is now trialling Click and Collect building on the work and investment it has been making in digital.

The trial will run across its kids’ range and across up to 25 stores in the northwest, and will launch towards the end of the year.

Clipper will provide online fulfilment capability, the store delivery solution via the Clipper Clicklink operation, and any associated returns management needs.

The 3PLs serving the fashion industry are becoming increasingly sophisticated in developing services to help specifically with issues such as returns. 

Another example is James and James, and its ControlPort cloud-based order management system. It provides data and analytics about the state of a customer’s supply chain and fulfilment, including insight on which products are moving quickly and which are costly, as well as providing an effective returns management process for consumers.

Fashion brand Gandys partnered with James and James Fulfilment to take advantage of its tech-led eCommerce fulfilment service.

Its founder Rob Forkan says: “A more strategic, technology-centric approach towards fulfilment was needed. Working with James and James has been a game changer for our business, and their SLAs (service level agreements) are fantastic.”

Flex operations

For GXO’s business development director Mark Catley listening to customers and having the capability to flex operations to changes are key.

He says: “Our customers want us to help them as the market changes, for example, in the consumer spending squeeze we are seeing at the moment. 

“This includes reducing returns rates by making sure the right product goes out the first time, in packaging that is both sustainable and ensures the product is not damaged.

“The returns operation itself needs to be flexible, as a variety of garments will come back. You can automate and use tech for certain parts of it, but there’s always going to be a level of human interaction.

“In terms of spikes we’re very good at flexing labour, in single operations and across operations, so we’re able to help our customers cope.”

Faster sorting

When it comes to the fast processing of returns, overhead dynamic buffers can offer a cutting-edge solution to removing the time, cost and effort of placing returned items back into stock. Manually sorting and placing items back into stock is a very time consuming and costly process, but now it can be avoided. 

For high-demand fashion products, keeping returned items in a buffer close to the packing area enables a quick and efficient re-despatch of the item.

Ferag UK managing director Darcy de Thierry says: “Some retailers anticipate and predict levels of returns, allowing them to re-sell items even before they are returned to the warehouse. Such techniques help boost sales and increase margins.”

Ferag recently installed a flexible high-speed Skyfall system at a new distribution centre for children’s fashion company, Mayoral Group, in Malaga, Spain. The extensive overhead pouch solution is one of the largest to date, with a mix of hanging pouches and garment hangers, with a throughput of up to 12,000 units per hour. The system features fully automatic unloading of pouches, including flat goods.

Another eye-catching example of sorter technology is the latest generation of KNAPP's pocket sortation concept, the AutoPocket. This is able to drop goods off precisely and fully automatically without needing to slow down or stop. The technology really comes into its own during peak periods. With goods pre-picked into pockets and stored in a dynamic buffer, products can be pulled off for orders whenever they are needed.

The pocket sorter system is helping The Very Group to fulfil customer orders in 30 minutes at Skygate, its distribution facility in the East Midlands. An installation of AutoPocket for Next at its new distribution centre in South Yorkshire, will go live next summer.

While returns are overshadowing much of what goes on in a fashion brand’s operations, it’s equally important not to neglect efficiencies that can be created in outbound operations. 

BearingPoint’s Stuart Higgins says: “Reducing labour availability and increasing costs are key drivers for the consideration of automated production and fulfilment centre solutions. At the same time, increasing demand for eCommerce fulfilment with minimal lead times increases the number of orders, and associated pick, pack, and shipping costs with consequent pressure on channel margins.

“Increasingly retailers are deploying DC automation to increase labour efficiency, by reducing non-productive time and increasing performance, by improved ergonomics and through workplace assistance.”

This includes the development of automated carton creation technologies that fabricate shipment cartons specific to each individual order to reduce cardboard waste and transport costs. An example is the CVP Everest from Sparck Technologies. 

Also, the implementation of robotics systems to work alongside humans can improve pick productivity. Here, the aim is to reduce human travel time, by keeping the picker within a relatively small areas of the warehouse and increase the amount of time they spend picking product. This is achieved by using robots to move product between pick locations within the DC – so the robots replace human walking time.

For a number of reasons, it’s set to be a challenging year for the fashion sector, but the opportunities are still very strong. What is clear is that fashion brands need to ensure they are deploying the right tech and working with effective partners to make sure operations are fit for purpose, come what may.