Have you ever observed your partner shopping in a garment store, collecting items from the racks, moving to a fitting room, trying the items before deciding to take only one, or in the worst-case scenario, none?
Most people don’t bring the garments back to the rack, but leave them at the collective stack near the entrance of the fitting rooms. OK, the cost involved for the retailer is more the time involved in folding the items, placing them back on a hanger, and returning them to the original racks undamaged.
It would be naive for e-commerce retailers (of any genre) to think that shoppers show different behaviour when shopping online? Here, however, the costs go beyond time and are potentially damaging to profitability.
Customers still collect several items online but have them delivered at home. Trying the items in the convenient environment of home with family or friends – maybe even using a selected item once, or on an evening out – before making the final choice for a single item or no item, returning the remaining to the Web-store. It’s probably impossible to change this shopping habit– most people wouldn’t want to reduce their right to choose in any shape or form, something retailers are, of course, keenly aware of.
It’s all Free Delivery, Isn’t it?
No, it isn’t.
Whilst “Free Returns” are, of course an excellent marketing ploy and good value for customers, actual returned items are costly for the Web-stores. They have to inspect, re-parcel and update their inventory systems; all this reduces the already tight margin on each product.
An estimated 50% of all garment parcels – ‘free of cost’ are returned. From all other items, deliveries 2 to 3 out of 10 parcels are returned. The pressure on the Web-store branch is high as most deliveries are also free or at an absolute minimum price.
The highest cost for the Web-shop is often depreciation. A shirt, for example, can only be sold for the full price during a limited time span. After this, price reduction starts due to change of season and new collections arriving. If the shirt has been out of the collection for three weeks (often six weeks to process some returns from mega-retailers) the chance is that it must be sold at a lower sales price; some items never make it out of the processing warehouse for any timely re-sale at all!
It’s all Free of Charge, Isn’t it?
No, it isn’t.
Sales have traditionally been a staple of the high street, but unprecedented e-commerce has driven seasonal discounting to continuous reductions to sharpen competitiveness and maintain customer loyalty. The focus of Web-stores today, in general, is foremost about price and service, growing the annual revenue, beating the competition – very rarely on a long-term survival and environmental sustainability model. It is still, notably, major seasonal events such as Black Friday, Cyber Monday and Christmas that are generating more returns than ever for stores to contend with. “Returns alone this year could cost UK retail massively. Global returns platform Rebound estimates that the logistical nightmare of tens of millions of parcels ending up in “Crimbo Limbo” – a no-man’s land of un-processed returned stock – will cost the UK around 362 million pounds”, (The problem with Black Friday returns and how AI could help, Huw Hughes, 23/11/ 2018; https://fashionunited.uk/). The evidence points to stores having to try to implement the subsequent costs somehow into their sales prices and dramatically improving reverse supply chain processes to become sustainable on the long term. The culture of intentional or “serial” returning – spiraling retailers into even greater price wars and ever reduced margins – is well documented and ‘here to stay’; see our article https://www.rfiddirect.eu/christmas-time.
But what has improved in the recent year since we produced this article?
Awareness certainly, publication of statistics and economic effects are now circulated routinely. Digital connectivity, data capture, collection and management (track and trace) through RFID and other technologies can and is helping – more cost-effectively – in managing returned goods and reducing the costs in handling them. It can also make inventory checks more efficient, create historical data on customer behaviour and increase customer loyalty when the data is used correctly and creatively through an omnichannel strategy.
It’s all Free of Charge, Isn’t it?
No, it isn’t.
Increased deliveries (and returns) of goods are not only costly for the Web-stores but also a cost to the environment with increased numbers of delivery vans on the road, growing volumes of packaging styles and products, producing continually increasing levels of CO2 – the bigger picture highlighting;
Air pollution, climate change, noise pollution, congestion, accidents and infrastructure wear and tear in the transport sector. In urban areas, these issues are stressed by the huge amount of people and by the high rate of deliveries.
Part of this impact on the environment is the item volume per packaging volume – most packaging contains a substantial volume of air in relation to the item. As a result, the courier vans are, wastefully, transporting more volume in air as in real volume per product.
The last mile of delivery is likely to be, “The least efficient stage of the supply chain and comprises up to 28% of the total delivery cost; therefore, the improvement of last mile logistics and a significant externalities reduction are very important challenges for researchers”.
(A Review of Last Mile Logistics Innovations in an Externalities Cost Reduction Vision; Published: 12/3/2018; by Luigi Ranieri, Salvatore Digiesi, Bartolomeo Silvestri, Michele Roccotelli)
www.mdpi.com/journal/sustainability
Needless to say, the wider cost implications here are clear; last mile logistics are now under scrutiny as carbon auditing becomes more precise and has entered the public discourse. New initiatives such as; creating more Collection Delivery Points (CPD), new emission-saving vehicles, collaborative urban logistics and improved optimisation of transport management – many based on utilising and analysing data capture and creating smart connectivity – will certainly help off-set the environmental costs to society.
It’s all Free of Charge, Isn’t it?
No, it isn’t.
There is currently a lot of dialogue about the circular economy (a focus on keeping and extracting the maximum out of resources in use for as long as possible, recovering and regenerating products and materials at end of life) as a sustainable, alternative to a traditional linear economy- where we make, use and dispose. This approach demands more than monetary costs in research: new manufacturing process initiatives and supply chain logistics, real efforts from industry, retailer and consumer to recycle and reduce; it involves moving away from a waste society to a model of committed re-use. However, for many manufacturers and retailers, the top concerns are to make products (packaging) attractive to consumers and to always keep an eagle eye on costs – sustainability is very often the third, or non-existent concern.
The problem, as outlined by Mark Dancy, president of WasteZero, a US-based waste reduction company in a recent article for The Guardian (Good product, Bad Package: Top Sustainable Packaging; Amy Wu, 18/07,14; www.the guardian.com) is that companies continue to commit packaging mistakes; companies and private sellers that deliver products through the mail often over-package, putting a pre-boxed item in a second box, and sometimes even a third one. This practice, which Dancy calls the “Russian doll” approach, is exceedingly wasteful (and annoying!).
However, several research projects are underway to develop sustainable packaging and reducing the waste as a result of this growing trend of home delivery. Darcy goes on to cite some of the more adventurous alternatives and the companies investing in more ecologically sound deliveries: including packing materials made from corn starch or sorghum, which can be composted, with New York-based Ecovative design developing fungus-based packing materials that are being used by Dell, Crate and Barrel and Puma, among others.
It’s all Free of Charge, Isn’t it?
No, it isn’t.
Discount culture and free returns for the consumer are established and likely features of online retail for some time to come and while it is positive that many initiatives are now starting to be embedded in packaging design and logistics to curtail future waste and loss, solutions for the here and now require more immediate, realistic solutions.
For many (smaller and larger) retailers who want to reduce risk with returns while retaining an easy and accessible process to keep customers happy, consideration of an inventory solution is at least one such possibility. Here at RFIDdirect, we can demonstrate that effective data capture to track and trace items – sometimes, but not always through RFID technology – will provide greater visibility and better understanding of stock returns, meeting demands but minimizing lost revenue.
Want to Experience RFID?
Send us your questions and problems via info@RFIDdirect and we will happily help you make an informed choice.
