Returns: the retail crisis everyone could predict

Research from Barclaycard in 2016 highlighted something we’ve all known for a while – handling returns can be bad for business. Almost one third of businesses (31%) surveyed by Barclaycard said they’d experienced loss of margin through returns.

But if handling returns is bad for you, handling them badly is really bad for you. Let’s face it, if you’re likely to have a problem processing returns, while doing your best not to lose margin and at the same time keep customers happy, it’s going to be in the next few weeks. A significant proportion of everything that is being bought in the UK right now is destined to be returned in the not-too-distant future.

Last year, Royal Mail experienced a 50% spike in people making returns on the first day back to work after the Christmas/New Year break. There’s no reason to expect things to be different when 3 January 2017 rolls round.

That, in my opinion, starts to get us close to the heart of the returns issue.

It cannot possibly come as a surprise to anyone that returns will peak in the aftermath of a busy sales period; the bigger and busier the sales period, the more returns there’ll be.

This is a crisis we can all predict from a long way off; no one should be getting caught out here.

The other thing you need to accept is that the returns problem, if we can call it that, is a human problem – it’s caused by customer behaviour. You make it easy for people to return things so they’ll trust you enough to buy them in the first place. The solution, therefore, needs to be one that works with people, not against them.

In an ideal world, every retailer would invest in sophisticated returns processing software that would enable them to track and route incoming returns from the minute the customer says to themselves, “Nah, that’s going back.”

The customer goes online, logs the return, and gets a label. You – the retailer – get the benefit of foresight, and with it the chance to route your returns in a way that takes some of the heat out of your operations, should that be necessary.

The reality, however, is that investing in that many bells and whistles, just to get you through a handful of exceptionally busy times isn’t economically viable for many retailers, especially those trading in commoditised, margin-pressured items. Plus, if you make the returns process the tiniest bit more complicated than absolutely necessary, or ask the customer to make the slightest bit of effort to return something and you’ll be judged … harshly.

So … what to do?

When it comes to returns, there are some similarities with click and collect. People flood your stores clutching the things they want to return, getting in the way of other shoppers, or of staff, and taking up floor space – a little like the queue for collections during peak times. This is not a great experience for anyone. You need as much of that as possible to be taking place away from your physical stores.

Christmas exerts a tremendous gravitational pull on the retail sector. It is always at the same time of year – it is not a moveable feast. Yet somehow there are still yearly panics and crises when it comes to processing sales, shipping items, and – more particularly – handling returns. It really doesn’t need to be like that.

Don’t have the capacity to cope with a returns peak? No problem. Find someone who has and partner with them. Tap into other networks. Learn from other’s expertise.

Will there be a cost? Well, let’s hope so. You’ll be losing margin on returns anyway, so why not invest in outsourcing some aspect of that operation to a professional whose business it is to help mitigate your exposure to lost margins?

 

This article first appeared on the Parcelly Thought Leadership Corner blog.