Woman processing return parcels
Online Retailer Study 2022 No returns, no online retail?
Any retailer is going to want as few returns as possible. But are returns just plain bad, as in the public perception, or are they quite simply a core, basic requirement when it comes to shopping online?
Would you shop online if you couldn’t return items?
Probably not – at least not if you were shopping for textile items. But no doubt consumers would be unlikely to order a whole host of other goods if they didn’t have the option of returning them. That is why this general rule applies to nearly all ranges: no right of return = no orders, and no online revenue. This makes “No returns, no online retail” a justified statement.
Returns from an economic point of view
From a business perspective, returns are a huge burden. A retailer has to have the goods in stock, pick them, ship them, take back some of them after 14 days at the latest, and even withdraw a small number of goods entirely. This results in processing, shipping and repackaging costs. This is why companies use various measures to reduce the rate of returns.
Returns from an environmental point of view
“Returns in the mail order business are a major environmental burden,” is a commonly held view on the matter.
An opinion that deserves a nuanced look:
- Packaging: returns are normally sent back in shipping packaging. Most packaging today is designed specifically to be used twice, whether you’re returning something or sending a gift to a friend.
- Transport: 98% of the time, returns are collected on routine runs “on the way back”. This means special transportation is only required in rare cases. To put it another way: if postal service providers stopped taking returns, their workload would decrease rapidly, but they wouldn’t save themselves a single journey.
- The goods are destroyed: This is the most widespread and most emotive argument. According to the findings of HANDELSVERBAND.swiss, 1 to 2% of returned goods in Switzerland cannot be resold because they are damaged, used or no longer in trend. No company chooses to destroy goods – unless laws (as is occasionally the case in the EU) impose additional taxes on sales below the purchase price. Fortunately, however, these laws are currently being amended.
Returns are first and foremost a business administration problem. The destruction of goods is not a problem specific to mail order business, but rather one that comes down to trading and economic management.
Returns rate as a % of the goods value?
The first thing to do is decide what the right metrics are: what exactly is a returns rate? For online retailers, the returns rate is primarily viewed as “returned value of goods : shipped value of goods”. Or, to put it another way: how much money is effectively left over from the order as revenue? In the textile sector in particular, these rates can reach very high levels that can even threaten the existence of a company. Conversely, we can also say this: evidently some online business models can tolerate a returns rate of 50%, whereas others can only tolerate a returns rate of 5%. It is all a question of gross margin/the absolute contribution margin towards covering variable logistical costs.
Returns rate as a % of the parcel volume?
The returns rate in terms of parcel volume must be dissociated from the company’s perspective. The “returned parcels : dispatched parcels” rate is always higher than the rate in terms of value seeing as not every returned parcel means a “full return”. Often just a fraction of the dispatched goods is in the return parcel, which explains why perceptions are so distorted.
Perception: “Every textile parcel is returned”
We probably can’t completely dismiss this perception seeing as the returns rate is very high in the textile sector in particular. Because of the reasons outlined above, however, returns are not an environmental problem for the retailer, but rather a business management problem. Given that it is precisely a business management problem, all companies work hard on suitable schemes to prevent returns seeing as the fewer return parcels online retailers get, the greater their contribution margin.
In view of all this, we can conclude that you can’t have online retail without returns – there’s no doubt about it.
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