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Returns within fashion logistics and the challenge that retailers are facing to evolve their supply chains me meet customer expectations.

“it is not the strongest of retailers that survive but the one that is most adaptable to change”
(Adapted from C.Darwin quote)

Returns has become one of the biggest challenges in retail; as consumer expectations have shifted the difference between customer supply chain and customer value chain has become blurred.

On average consumers purchasing clothing online will order three to buy one with 2 being returned. Regardless of the reason for returns they expect a process that will restore cash to their account quickly and deal with any problems such as manufacturing defects promptly. Customers are focussed on the journey; looking for a seamless experience that doesn’t inconvenience them and definitely doesn’t cost them. Before e-commerce turned the retail sector on its head, returns were made to the store where the goods have been purchased; consumers now expect to be able to return goods to any store, via postage or drop points.

Factors:

Consumers and Social Media

Free Flexible Delivery and Returns

Inventory and Stock Delivery

Try Before you Buy

Add to that social media means that customers will take to the airways to voice their views (whether correct or incorrect), creating a PR nightmare for retailers. It is therefore not enough for retailers to see fulfilment as the end of the supply chain, they need to create and experience and create a value chain that is part of the purchasing journey (consumer electronics is a good example because they have had to do swap outs and returns for 10 years with a price point that dictates seamless service).

Since ASOS pioneered free delivery it has become an industry norm; empowered consumers now expect goods to be delivered and returned for free with customer service to boot. At the same time Private Equity backed parcel companies have led a charge to the bottom in the final mile market to pick up volumes of work at unsustainable margins. Just getting goods to customers is not enough; they expect to be able to track and change deliveries as part of the service, something many companies struggle to offer.

UK returns cost around £60bn, with an item passing through seven pairs of hands before being relisted. Many of these hands are not the retailers but the couriers and carriers; consider then who is taking the burden of cost. Many retailers still see returns as a logistics problem; relying on those teams to move goods back and forth with little concern for cost or service levels. Unfortunately the true cost of returns is often not monitored, analysed or accounted for and as such retailers are not factoring this as part of their fulfilment plan, instead taking a head in the sand approach.

Stock visibility is critical to effective retail operation and multi-channel fulfilment; without this information you cannot offer a seamless experience because you will not know what you are shipping from where. This is where traditional retailers have failed to keep up; the pureplay retailer will process returns into their (often sole) DC before re-listing them. The high-street retailer however is required to have a centralised stock management system that can record the returns and ensure they are processed accordingly. You also create physical supply chain inefficiencies by over moving and purchasing stock and could be allocated at store level.

Many of the high-profile failures we have seen in the past couple of years have been as a result of the inability to transform operating models and meet evolving customer expectations. John Lewis are a textbook example of taking a different approach; from day one they embraced the potential of e-commerce, transforming the business to offer clever e-commerce and drop shipping solutions. They offer a no quibble returns policy which ensures good PR with customers who receive quick refunds whilst returns are processed.

So how do retailers up their returns game?

  • Accept returns for what they are and differentiate between value chain and supply chain; embracing returns into the customer journey as an opportunity to provide a high level of service that triggers positive feedback.
  • Incorporate returns into business planning to manage margins and retain profitability.
  • Invest in systems that create stock visibility and fulfilment options with each store being treated as a mini-DC, or, create a process that charges and processes returns by site who then re-list stock locally.
  • Work with fulfilment partners to jointly invest in solutions that benefit all parties, this requires long term commercial commitment.
  • Offer a try before you buy service that incorporates the returns cost.

Above all customer expectations must be managed; it should be clear before you begin shopping what the delivery and returns arrangements are and who is paying for them. In a world where the budget conscious consumer’s purchasing decisions are driven by value, loyalty has been lost, and to stand out you need to deliver across all channels – including social media.