Returns are a burden for the environment and a growing expense for retailers. Spurred by the pandemic, the rapid increase in online shopping has only exacerbated the problem. Historically, consumers return three to four times as many online orders as in-store purchases. As a result, online returns more than doubled in 2020 from 2019. This sheer volume combined with inefficient returns management and customer service strategies has created an extraordinarily wasteful system.
From excessive single-use product packaging to transportation emissions to the estimated five billion pounds of returned merchandise that gets tossed away, the planet is suffering the consequences, and consumers are taking notice.
To combat growing returns waste, we’ve identified five strategies retailers can implement to prevent returns and make them more sustainable.
1. Embrace the Circular Model for the Reverse Supply Chain
Retailers can no longer afford to operate linearly when it comes to their forward and reverse supply chain. Instead, they must embrace a circular model by reselling as much returned or overstock merchandise as possible. Through innovative processing and refurbishment strategies, retailers can keep returned items in circulation longer and resell them for the highest possible value. Leaders in this arena include brands like Patagonia, LuluLemon, Best Buy, and Adidas, which have special programs to resell or recycle their used products.
Fortunately, retailers can take advantage of the secondary market to resell their gently used goods. Market data and sales from goTRG's channels show consumers are much more open to buying refurbished and pre-owned products on the secondary market today. In fact, goTRG conducted a Covid-19 retail survey showing that nearly 70% of consumers had purchased at least one refurbished product from a recommerce channel in 2020.
In addition, more than half of millennials and Gen Z consumers indicated they would buy a refurbished product if the new one they wanted was out of stock. Even before the pandemic, industry leaders expected the resale market to double between 2019 and 2021. Now it's expected to grow by 69% by the end of this year.
According to industry experts, refurbishing and reselling returns is the best option to make returns more sustainable. In the Electronics Stewardship report, the EPA said that “preventing waste in the first place is preferable to any waste management option, including recycling.”
2. Employ Returns Management Software
Ecommerce returns are highly inefficient due to the number of touchpoints, transportation, and packaging waste required to process them. Yet, it doesn't have to be that way. Retailers who that employ tech-focused systems and AI-driven software can efficiently move returned inventory to their new homes with as little waste as possible. This means fewer shipments and fewer items that needlessly end up in landfills.
AI-driven software harnesses data to inform the best decision about processing, shipping, refurbishing, or reselling an item. The most effective technology will calculate product dimensions and weight for transportation expenses, repair and remarketing costs, sales velocity, and pricing trends to determine the most sustainable and profitable disposition path. Most importantly, such technology will make the determination in lightning speed, with precision. The sooner and smarter retailers can make these decisions, the fewer wasteful touchpoints required, and the better their chances of minimizing environmental impact.
3. Prevent returns through better customer service
When it comes to returns, consumers send back clothing and accessories more than any other category. The primary reason? Sizing issues. Consumers can’t physically try on clothes online, which means many engage in bracketing, a behavior where they buy multiple sizes of a single item with the intent to return the ones that don’t fit. In 2020, more than 60% of consumers employed bracketing–an enormous 29% increase from 2019.
Conscious retailers must enact innovative front-end technology to quell the bracketing epidemic. Organizations like Macy’s, Adidas, ASOS, and Modcloth are leading by using virtual fitting rooms to allow customers to “try on” apparel before adding items to their carts. These augmented reality fitting rooms work by enabling shoppers to try on clothing via an avatar and are known to be “shockingly accurate.” In fact, technology company Zeekit claims its virtual reality fitting room service has reduced return rates for its partners by 36%.
4. Reduce Packaging Impact
The online shopping (and returns) boom has led to a surge in single-use e-commerce packaging waste. Corrugated box shipments skyrocketed since March 2021 when they grew by 9 percent year over year. Moreover, fragile products need secondary packaging such as bubble wrap or air pillows in addition to the primary box. Market research firm, Technavio estimated that demand for secondary packaging would increase by $1.16 billion over the next four years due to the spike in online sales.
That’s why major brands are rethinking packaging requirements or switching to sustainable, renewable materials. The world’s most prominent culprit, Amazon, is also leading the globe in its initiatives to reduce packaging waste. As of June, Amazon announced it reduced the weight of outbound packaging by over 36% and eliminated more than 1 million tons of material since 2015. Even Burger King is jumping on the sustainable packaging bandwagon with eco-friendly solutions for new whopper wrappers, frypods, cutlery, straws, lids, and napkins.
In addition to utilizing more sustainable materials, brands can help reduce the number of boxes in circulation by changing their returns process. For instance, retailers can grant longer returns shipping windows. This will allow customers to combine multiple returns (from multiple orders) into one box instead of needlessly sending them separately. By extending shipping windows, retailers could experience the added benefit of increased brand loyalty. Why? Customers want convenient returns. 50% of shoppers told goTRG that short refund windows would make or break their decisions to buy from a retailer.
Retailers can also reduce packaging requirements by making it easy for online customers to drop off as many unwanted items at brick and mortar locations as possible. Not only does this eliminate needless shipping and packing requirements, but it will also make customers very happy. In goTRG’s State of Returns survey, more than 70% said they would prefer to drop off returns at convenient locations rather than shipping items.
5. Prevent Returns by Giving Customers Alternatives
So what if customers don’t love the item they bought? What if retailers could convince them to keep the product anyway? Subscription-based companies like Audible and LinkedIn employ retention programs to prevent customers from canceling their services. Before processing the cancelation, these companies often offer a steep–albeit temporary–discount for customers to continue their membership. What if retailers took a similar approach?
Instead of providing automated returns processes that generate shipping labels without any customer interaction, retailers might consider a more tailored, incentivized approach. When a customer initiates a return, retailers should try to figure out why and potentially offer discounts to trustworthy shoppers to hold onto the item instead of shipping it back.
Another option is returnless refunds, which customers also love. In goTRG’s recent survey, respondents said that returnless refunds is one of the most critical aspects of making their returns experience better. The consumer benefit makes intuitive sense, but returnless refunds also make financial and environmental sense for retailers.
For one, shipping lower value returns around the country yield harmful transportation emissions and wasted packaging. On top of that, retailers generally spend more money shipping and processing these items than they can make from reselling them. Still, retailers should create filters to ensure customers aren’t taking advantage of the program.
Consumers want retail sustainability.
If retailers don’t take steps to make returns more sustainable, they risk losing profits and harming their brand reputation in the process. Customers, particularly millennials, want to support brands that protect the planet. A study from Nielson showed that nearly three-quarters of millennials are willing to spend more on items from a sustainable or socially aware brand. With millennials and GenZ shoppers increasing to 45% of the market by 2025, retailers can not afford to gain notoriety for being irresponsible. In this increasingly competitive retail landscape, the cost is too high to ignore.
How retailers can make returns more sustainable
The best way to make returns sustainable is to prevent them altogether. Fortunately, retailers can take advantage of innovative strategies to reduce the number of items customers send back. Still, lowering returns to zero is outside the realm of reality today. So retailers need a multi-pronged approach that both reduces returns and optimizes returns management.
To learn more about goTRG’s sustainable returns solution and mission, visit one of our resources below: