The short answer is no—to both of them [the business impact and environmental impact]. In fact, in terms of business impact, we see all these retailers filing for bankruptcy. No one is immune to bankruptcy. Forever21, Beauty Brands, Gymboree and several others filed Chapter 11 this year. Retailers have to be really diligent about maintaining their bottom lines and returns are a significant expense. Every $1MM in returns reduces the bottom line by $0.5MM.
In terms of environmental impact… I think for a while it was fashionable to talk about or market sustainability, and retailers are hesitant to dive in because it will increase costs that they will then need to put on the customer. But businesses are catching up to consumers. We see that with new business models like clothing/furniture rental services and consignment, like ThredUp. I think there are some companies that are better about what they do with products that are returned, such as refurbishment and remarketing, rather than throwing it in landfill. The whole process of returning has an environmental cost.
For any eCommerce store, an attractive returns policy is essential. How do you feel retailers can reduce returns without compromising on customer experience?
We’re at a point now where some retailers are encouraging people buy more and return, in order to make the sale without considering the ramifications. For a company looking to be more sustainable, this kind of practice should be discontinued. Customers are now buying things with the intent to return, and they likely don’t know how harmful that is to the environment. One way to discourage this customer practice is to require a nominal fee for returns that are made for reasons out of the retailers control, such as bracketing [buying multiples of the same item with the intent to return]. Retailers are hesitant to do this, because free returns help convert online sales. The industry encouraged this type of consumer behavior, and now it’s very difficult to reverse. It requires education during the shopping experience. If your customer base is concerned with sustainability, then communicating how returns impact the environment and encouraging them to return the product to the store (BORIS, “buy-online-return-in-store”) can be a good strategy.
Customers aside, there are 65% of returns that are happening that can be avoided, for reasons like the incorrect item was shipped or the product didn’t match the web description. These are returns retailers can start reducing today that will have a significant financial and sustainability impact, and even a 1-3% decrease in return rates can save retailers millions.