An overlooked but mighty issue exists within the e-commerce industry, drowning retailers in unaccounted-for expenses and time: returns. Returns have always been a nuisance for companies in the digital age, but with the pandemic accelerating the e-commerce market to $4.9 trillion1 worldwide in 2021, the returns monster is only growing. To their own detriment, many companies fail to take this issue seriously: eight in 10 executives2 admit that addressing return strategy is not a priority for their C-suite. In today’s fast-paced market, retailers must invest in reverse logistics technology, and consider returns as a part of their business strategy, or risk losing customers, money, and time. Companies would do well to consider the following industry trends:

Reverse logistics must also be data-driven

It is not new knowledge that to survive in today’s e-commerce ecosystem, retailers must transform their logistics processes, bringing them to digital and using data to more efficiently make decisions. However, with online shopping growing at an unimaginable speed thanks in part to the pandemic, reverse logistics are becoming a significantly expensive burden for retailers: In 2020 alone, returns cost sellers $428 billion3 globally. Overlooking returns is no longer a sustainable business strategy, and the digital, data-driven practices that so many retailers have integrated into their logistics strategies must also be adopted into reverse logistics. With more insight into their reverse supply chains, companies will understand the financial significance of returns and be able to use the data to improve efficiency and their bottom-lines.

Consumers’ demands are evolving

As e-commerce sales soar, so do customer expectations. According to Narvar’s 2018 report4, 69 per cent of shoppers do not buy online if they have to pay for return shipping, and 67 per cent are deterred from buying if returns are subject to restocking fees. Additionally, the pandemic has brought certain consumer behaviour to the mainstream, including the rise of bracketing: where consumers purchase multiple sizes or colours of clothing items5, only to return most of them. As consumer expectations evolve, retailers must pivot their business strategies to meet the changing demands. With services like returns tracking and quick reimbursements rapidly becoming the industry standard, an easy, free return policy is critical to maintaining happy customers, and can even be an opportunity to engage them further6: 52 per cent of consumers say they have made an additional purchase from a company after a positive customer service experience and will pay 17 per cent more to do business with firms with great reputations when it comes to customer service. Streamlining reverse logistics will ensure that consumers are more satisfied with their retail experience. 

Sustainability is the future

Adding to the financial and logistics headaches that come with returns is the issue of their environmental impact. A staggering 40 per cent of returns are thrown away7, totalling about 5 billion pounds of waste every year. Even more astonishing is that many of these items are in perfect condition; retailers simply don’t have the tools or strategy to deal with them in an effective way. Additionally, the return process requires another round of transport via plane or truck, which creates more pollution and carbon dioxide emissions. As sustainability becomes the new standard in retail, and 85 per cent of consumers report shopping ‘greener’8 in recent years, companies must consider the environmental impact of their returns strategy, or risk future obsolescence.

It is no longer viable9 to treat returns as an afterthought. Rather, companies should reframe returns to be a key part of business strategy and invest in reverse logistics technologies. As technology finds itself in all aspects of our lives, expectations for e-commerce experiences are higher: efficiency and ease are no longer negotiable. Retailers must embrace a multi-pronged approach to tackling returns and helping the environment by not only embracing data-driven reverse logistics, but also embracing solutions that tackle returns before they start. Businesses, consumers, and the environment will be a whole lot better off for it.

Ronen Luzon is CEO of MySize