The Retailer Winter 2018/19

Take-back generates profitable returns

Matt Luntley Account Manager, Recycling Services, Valpak

ONLINE SALES ARE LEADING TO HIGHER CUSTOMER RETURNS, BUT STRATEGIC CONTRACTS CAN TURN A FINANCIAL AND ENVIRONMENTAL COST INTO OPPORTUNITY. During the first week of January, a staggering 5.8 million products were returned to retailers, items such as clothing, electrical appliances or household goods – unwanted Christmas presents or faulty gifts that need to be exchanged. What they all have in common is that managing them incurs an additional cost for the retailer, and an adverse impact on the environment. While the start of the year sees a large volume of returns arriving over a short period, retailers increasingly need to factor returns policies and systems into their business models. Consumers expect prompt, efficient service, and online retail has also led to new ways of shopping which generate returns as an inevitable side effect. For example, the knock-on effect of 40 per cent of shoppers buying multiple products or sizes, with the intention of keeping just one, is that e-commerce sales result in a return rate as high as 30 per cent. This behaviour has a major impact on costs, which anyone in sales will be well aware of. It may seem straight forward to repackage unwanted goods for re-sale, but the reality means that less than half are re-sold at full price. As result, online shops have to find ways to absorb losses of around 10 per cent. The financial burden is easily assessed, but retailers – and consumers – are less aware of the environmental impact of their behaviour. According to William Rowley at Refundease, the 66 million garments returned in London each year generate the equivalent of 8,500 metric tonnes of CO2, enough to power 1,274 homes. Transport is a major factor. Even with a green fleet, transporting products twice will double their impact, but delivery vehicles tend to be high polluters. In addition, packaging, handling and administration all play their part before the item is even classed as waste. Retailers are committed to providing consumers with choice and a quality service, but squaring this with economic realities and environmental needs is a challenging balancing act. Some products, such as electrical and electronic equipment, can be managed more efficiently, but tackling wider returns calls for partnership between retailers and waste managers.

Case study: Electrical goods returns Electrical items make up 10 per cent of online product returns. As well as being bulky, they present a unique challenge for retailers. The value in waste electrical and electronic equipment (WEEE) makes it one of the most prone to waste crime, but it also falls under the ruling of the WEEE Directive, a special legislative requirement designed to ensure that any equipment and devices are disposed of safely. WEEE producers are required to register with a compliance scheme, and report on the volume of material they place on the market each year. This figure determines the level of fee they pay to contribute to the recycling of redundant equipment. The most profitable choice for the retailer would be to re-sell any products which are sent back, but even those which are not faulty will need to be tested before they will be suitable to be placed back on the market. As a result, many retailers consign all electrical returns to recycling or disposal even though, environmentally and cost-wise, they would benefit from sending items for reuse. The key to successful management of WEEE is to engage with your accredited waste handler to negotiate a commercially – and environmentally – beneficial strategy. Ideally, waste items should be graded and, where possible, refurbished or sold in the UK or elsewhere. Goods which cannot be resold with minor work can be used for parts, with the aim of making one good item from two faulty ones. Some companies prefer reuse to take place overseas, in order to protect their brand and to avoid a second market springing up in the UK. However, international reuse needs a robust data trail to ensure that only the most reputable organisations are taking charge of products. While it is easy to negotiate a contract and sign items out for recycling on a regular basis, it is worth thinking more strategically and considering WEEE as a valuable resource rather than a problem to be dealt with. Some items offer greater potential than others. Take fridges, for example; recycling 10 tonnes of fridges will cost a minimum of £500, while reuse could generate around £1,000. One way to ensure the best deal is to work with a broker, rather than contracting directly with a waste management firm. Although still providing one point of contact and data provision, a broker will not face pressure to fill its own facility, and has the flexibility to choose commercial KPIs, accessing a range of commercial warehouses as and when appropriate.

36 | winter 2019 | the retailer