Ordered online, didn’t like it, sent it back. What is positive for customers leads to costs for retailers. They specifically try to reduce the number of returns.
Order four pairs of pants, send three back – this is common practice when buying clothes online. Unlike in the store, customers cannot try on the goods. Many people therefore order several sizes at once and only keep the one that fits. You usually don’t have to pay anything for the return. They are also returning other products. But the return rate is highest for fashion items, at an average of 26 to 50 percent, according to a current study by the retail research institute EHI.
To do this, the institute surveyed online retailers from Germany, Austria and Switzerland. For them, returns primarily mean costs. For each item returned, retailers have to spend an average of between five and ten euros. Returns in the home and furnishing sector are more expensive at 10 to 20 euros due to their size and the higher value of the goods. According to those surveyed, the biggest cost driver is checking the returned items and checking their quality.
Measures to avoid returns
“Returns place an enormous burden on online retail,” says Stefan Genth, managing director of the German Trade Association (HDE). “Handling returned goods costs money and human resources.” Companies are doing a lot to reduce returns. “For this reason, retailers are constantly perfecting their product descriptions and size information,” says the HDE. “Artificial intelligence is often used.”
This has achieved little so far. The return rates are stagnating. According to the EHI study, on average across all product groups, the item-related return rate is between six and ten percent and is therefore at a similar level to previous years. 58 percent of retailers state that the rate is constant, 21 percent say it has increased and 15 percent say it has decreased. According to the study, the pandemic did not have a significant impact on development.
This may also be because retailers have so far been reluctant to pass on the costs to customers. Few sellers, for example, leave the shipping costs for returns to you. According to EHI, only 14 percent of online retailers make use of this option to reduce the number of returns. Almost two thirds cover the shipping costs. “It seems to them that it is essential to offer this service because of the high level of competition and because they assume that customers expect such a service,” the authors write.
More returns at Christmas time
Shipping volumes will increase significantly again, especially in the upcoming Christmas season. The delivery people are working on the stop. The transport industry emphasizes that the many returns do not make their business more difficult. “The returns are processed without any problems using the existing delivery capacities of the parcel service providers,” says the Federal Association of Parcel and Express Logistics. “Returns are also unproblematic for parcel service providers in that returns are consolidated in the last mile and the recipient (i.e. the retailer) is always present.”
The market leader DHL made a similar statement. “The capacities for returns are taken into account at an early stage when planning transport or planning the Christmas business,” the group said upon request.
What happens to the returned goods?
Not all returns will be resold. Particularly when it comes to clothing, some items that cannot be reprocessed are destroyed. In a 2019 study, the returns management research group at the University of Bamberg came to the conclusion that almost four percent of returned goods were disposed of. However, the EU Commission has now put a stop to this practice.
Larger retailers will no longer be allowed to destroy unsold clothing in the EU in the future. Negotiators from the European Parliament and the EU states also agreed on Tuesday night that the EU Commission can extend the ban to other products in the future, as the two negotiating sides announced. According to the information, there are exceptions for small companies and a transition period of six years for medium-sized companies. In principle, the ban should be applied two years after the regulation comes into force.
Source: Stern
