The Retailer Spring Edition 2023

THE RETAILER

32

FIVE ALARMING INSIGHTS INTO RETURNS, AND HOW TO ACT ON THEM

Katie Quarmby Director Newton Europe

M ost retailers don’t realise that returns are their biggest supplier, or understand their true cost. When we’ve taken a deep dive into a retailer’s returns data and showed them where their biggest opportunities are, there are two things that inevitably surprise them: 1) If you look at returns as a whole, they are a retailer’s biggest supplier 2) Returns can account for a 6% hit on the RRP of all sales It’s an alarming statistic and not something that retailers can sustain, especially in the current economic climate. These issues are set to worsen as online shopping – and therefore the volume of returns – continues to grow. It really brings home the true scale of the issue and the urgency with which retailers need to start rethinking how they manage returns while delighting their customers. The truth is, there’s a large number of missed opportunities to reduce the cost of returns, and a lot of value that isn’t being realised. The issues with returns are largely due to a lack of ownership and end-to end visibility, leading to a lack of insight into how returns move through the business and where the biggest costs and opportunities lie. The cost is so much more than what you pay your third party logistics providers. As a result of this lack of oversight, inefficient processes become more deeply embedded, and new initiatives – whether that’s a new sizing tool, an updated returns policy or a new returns channel – fail to deliver the intended benefits and can even make things worse. Based on our forensic analysis of end-to-end returns, I’ve summarised five new insights and how retailers should rethink returns to minimise the cost and maximise the value of this stock. Insight 1: Returns are a retailer’s biggest supplier They say prevention is better than cure, and while some returns are inevitable, there are currently too many regretted returns. While some retailers have used tactics like sizing tools and fraud-proof packaging to tackle the issue, our research shows that these don’t always have the desired effect. Crucially, retailers need to make sure they have the right information to understand customer behaviours, decide what tactics are needed, and assess if they’re working. They should also feed insights back to buying, merchandising and supply chain teams as part of a rigorous improvement cycle. Better insights will ensure retailers are getting the most out of their prevention tactics and coming up with targeted innovations that work.

Insight 2: Returns account for a 6% hit on the RRP of all sales A lack of ownership and visibility means the cost of returns is hidden in the P&L. This has allowed returns to reach a point where it now urgently needs solving. As with any major supplier, returns require clear ownership that’s sup ported by end-to-end visibility and meaningful insights. End-to-end means everything from the reasons for returns and the online customer journey to in-store processes, merchandising and stock exit. Only then can a retailer agree on clear performance metrics and start to actively manage costs. Insight 3: Returns can take up to a month to process When you add on a 30-day returns window, this means that seasonal stock especially is unlikely to be resold at full price, if at all. We’ve seen instances of summer clothing not being available to be resold until more than 100 days after the initial sale, because the returns policy was overridden and the process was so inefficient. Other factors include poor computer systems and the inability to move stock between different channels to meet consumer demand. Retailers need the right policies, processes and network capability in place to get stock to the right place at the right speed and for the right cost. For one retailer, we helped to set up a new, cheaper route between stores in a local area to improve stock availability.

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The issues with returns are largely due to a lack of ownership and end-to-end