A report from a global cleanup company claims that online shopping returns are costing retailers billions. They are also dumping tonnes of carbon into the atmosphere and billions of pounds into landfills.
CleanHub reports that in 2022, online retailers will face a cost of US$816 Billion for returns.
Every year, customers return up to 30% of products bought online — three times the amount returned to brick-and-mortar stores — it continued, producing 24 million metric tonnes in CO2 emissions.
In the report, it was noted that when an item is returned to a retailer, it’s often cheaper to throw it away than sell it. In 2022, this will result in 9.5 million pounds of returned goods being sent to landfills.
Nikki Stones is the CleanHub Vice President of Marketing. She believes that online returns are disproportionately high because of convenience. “Online shopping should be as easy as it can be,” she told E-Commerce Times.
Buyers can try the product at home and, if it doesn’t live up to expectations, they can return it with little effort. In-store purchases require the buyer to physically return the product.
The fundamental difference between buying online and in-store also boosts returns. “The stark differences in return rates between in-store and online purchases are primarily due the inherent limitations of shopping online,” said Jason Davis, founder at Makarios MarketingSEO Consulting Company in Henrietta N.Y.
He told E-Commerce Times that consumers cannot physically interact with the products. This leads to mismatches between expectations about fit, quality and appearance.
Mountainous Problem
Returns management company has conducted a recent survey. goTRG According to a survey conducted by more than 500 U.S. based retailers, nearly half of them now see returns as a major problem, especially around the holidays.
Sender Shamiss, CEO of goTRG, said that this sentiment had grown by nearly 3,000% from September 2022 when only about 2% retailers felt it was a serious issue.
He told E-Commerce Times that the trend was a result of the increasing popularity of online shopping and the easy return policies. “E-commerce companies typically have a return rate of 20%-30%, due to factors like customer dissatisfaction or incorrect sizing.
He added that unmanaged returns can be costly due to damages caused during the transportation or storage process of items such as clothing or electronics.
He said that many retailers do not have the infrastructure necessary to restore these goods to their original condition for customers. They end up selling them at a significant discount to liquidators or, worse still, discarding them.
To prevent that returned goods end up in landfills, he suggested retailers become active participants of the circular economy.
Reverse supply chain specialists can refurbish and restore the returned goods to new condition. ReCommerce solutions are then either listed on the original market or sold in secondary markets.
If more retailers worked with reverse logistics and returns management service providers, he said, “then millions pound of products could be placed on a second shelf instead of contributing to the 9.5 billion pound of returns that ends up in landfills.”
Davis added that the 9.5 billion pounds in returns that end up on landfills are alarming, but not surprising. “Solutions can be found in innovative logistical solutions, such as streamlined returns processes that include quality checks and immediate stocking. Technology for better product visualisation is also a key factor to reduce return rates.
Clothing is not allowed
CleanHub’s report identified that online shopping has a negative impact on the environment.
According to the report, online shopping creates 4.8x more packaging waste than brick and mortar stores. Stones explained that online shopping needs extra packaging in order to protect the products and ensure they reach buyers in perfect conditions. “Some retailers encourage customers to add extra materials when returning products.”
Reports show that retailers offer advice on how to package extra materials, even though they encourage customers not to return products in their original packaging. Shoppee advises customers to “securely tap the products and wrap with at least two rolls of bubble-wrap” if they are unable to use the original packaging.
Workers unwrap and process products in warehouses for resale. The report continued that workers unwrap, process and often re-package products for resale once returned to warehouses.
CleanHub’s report noted that fashion was a leading cause of returns among online shoppers. Clothing returns are 32% higher than consumer electronics. Customers who try on clothes — or even wear them once before returning — make it difficult to resell the items, meaning they often get sent straight to a landfill.
Returns Management: Investing in the Business
Shamiss, however, asserted that retailers are beginning to address the return problem. He said that 75 percent had invested in improving their returns process in the past 12 months, and most of them spent between $1m and $5m.
“Even more telling”, he said, “90% reported that they had increased investments in this sector compared with the previous year. These investments include advanced return management systems and partnering with third-party return management services. They also include customer education about return policies.
He said that “for the first time ever in history, the returns problem has decreased from $816 Billion in 2022 to 743 Billion in 2023.” This should be interpreted not as a reduction in market size — as to the contrary retail and online sales have grown an estimated 4% to 6% — but rather as a strong indicator that the investments these retailers are making are paying off.”
He said that retailers are using innovative return strategies through dynamic returns software, which includes features such as “keep it”, trusted customers, partial returns, instant credit, instant exchanges and additional drop-off options. These options offer customers more convenience and choices for returns, enhancing the post-purchase shopping experience.
He continued: “Ultimately, retailers can improve retention rates up to 30%, and save sales by converting refunds to exchanges, store credit, or partial refunds,” said Mr. Ayers. “Furthermore a returns service provider with intelligent detection and identification capabilities, reporting and prevention can help combat the $100 billion in fraudulent returns and abuses.”
You can find more information about the environmental impact on returning online purchases at CleanHub.
