The UK retail sector has been under a barrage of attacks in recent months that has seen consumer confidence drop and Brexit continue to create high levels of uncertainty. Whilst the UK press might report a strong economic outlook at the moment, when you dig beneath the surface a different story emerges with inflation dropping and interest rates rising for the first time in 10 years.
An ongoing challenge for retails as we head into peak trading is that of returns, two thirds of online shoppers will return at least one item with Clipper reporting annual returns would fill over 40 football pitches. The cost of returns is now impacting on prices with 1 in 5 retailers increasing price to cover the cost of returns. On average 25% of women’s fashion purchased online is returned and the costs of processing returns is around twice that of the initial fulfilment.
The problem has been created because to encourage online shopping retailers promise free returns, now there is nothing to stop you buying 3 sizes and returning the 2 that do not fit. Whilst businesses have invested in returns processing facilities, some figures suggest the 5% or returned items are binned.
ASOS are trying to counter this with the option to try before you buy but reading into the that idea it sounds like it will only increase the number of returned items they have to process.
How do you reduce the cost of returns?
In the past retailers have blacklisted shoppers who return too many items by actively monitoring their online accounts and shopping habits; theoretically this reduces how many returns will be made but does not discourage the practice instead it prohibits serial offenders from shopping.
Perhaps in the age of big data where spammers know more about us than we realise, consumers should be handing out their vital statistics as well so that retails can check their purchases will fit.
The problem has been created by retailers rushing to offer a service they cannot provide and don’t have processes for; specialist e-retailers such as ASOS invested vast amounts of money to ensure they have a robust supply chain and factor in the cost of returns. Other retailers offer the same service but do not have the ability to compete with the specialists.
It may not sound like a ‘solution’ but a poor business plan will fail and trying to offer an omni-channel service through a traditional high street network is not going to succeed. As with any successful business you need a plan and a competitive advantage; imitating the disruptive competition will guarantee you failure not success. Unfortunately there are too many recent examples of this, to succeed in online retailing you need to align your proposition and invest.
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