Consumer goods - Returns: practical for consumers, expensive for retailers
Order four pairs of pants, send three back - this is common practice when buying clothes online. Unlike in a store, customers cannot try on the goods. Many therefore order several sizes at once and only keep the one that fits. As a rule, they do not have to pay for the return. They can also return other products. However, the return rate is highest for fashion items, averaging 26 to 50 percent, according to a recent study by the retail research institute EHI.
The institute surveyed online retailers from Germany, Austria and Switzerland. According to the study, returns primarily mean costs for them. On average, retailers have to spend between five and ten euros for each returned item. Returns in the home and furnishings sector are more expensive at 10 to 20 euros due to their size and higher value. According to the respondents, the biggest cost driver is checking the returned items and checking their quality.
Measures to avoid returns
"Returns are a huge burden for online retailers," says Stefan Genth, Managing Director of the German Retail Association(HDE). "Handling returned goods costs money and human resources." Companies are doing a lot to reduce returns. "For this reason, retailers are constantly perfecting their product descriptions and size information," says the HDE. "Artificial intelligence is often used in the process."
This has achieved little so far. Return rates are stagnating. According to the EHI study, the average returns rate for all product groups is between six and ten percent and therefore at a similar level to previous years. 58% of retailers state that the rate is constant, 21% say it has increased and 15% say it has decreased. According to the study, the pandemic has not had a significant impact on the trend.
This may also be due to the fact that retailers have so far been reluctant to pass on the costs to customers. Few sellers pass on the shipping costs for returns, for example. According to EHI, only 14% of online retailers make use of this option to reduce the number of returns. Almost two thirds cover the shipping costs. "It seems essential for them to offer this service due to the high level of competition and because they assume that customers expect such a service," write the authors.
More returns at Christmas time
The volume of returns will increase significantly again, especially during the upcoming Christmas period. The delivery staff are working to the limit. However, the many returns are not making their business more difficult, the transport industry emphasizes. "The returns are being handled by the parcel service providers with the existing delivery capacities without any problems," says the German Parcel and Express Logistics Association. "Returns are also unproblematic for parcel service providers insofar as there is a consolidation of returns on the last mile and the recipient (i.e. the retailer) is always present."
The market leader DHL expressed a similar view. "The capacities for returns are taken into account at an early stage in the transport planning or planning of the Christmas business," the company said on request.
What happens to the returned goods?
Not all returns are resold. In the case of clothing in particular, some items that cannot be reprocessed are destroyed. In a 2019 study, the Returns Management Research Group at the University of Bamberg came to the conclusion that just under four percent of returned goods are disposed of. However, the EU Commission has now put a stop to this practice.
Larger retailers will no longer be allowed to destroy unsold clothing in the EU in future. Negotiators from the European Parliament and the EU member states also agreed on Tuesday night that the EU Commission can extend the ban to other products in future, as the two negotiating parties announced. According to the information provided, there are exceptions for small companies and a transitional period of six years for medium-sized companies. In principle, the ban is to be applied two years after the regulation comes into force.
Read also:
- Retailers in Germany, Austria, and Switzerland, as mentioned in the study, are significantly affected by returns, especially in the fashion industry, with return rates averaging between 26% and 50%.
- The German Retail Association (HDE), led by Managing Director Stefan Genth, acknowledges that returns are a significant burden for online retailers, requiring both financial resources and human effort.
- To reduce returns, retailers are improving product descriptions, using size information, and employing artificial intelligence, as suggested by HDE, aiming to provide customers with more accurate information, leading to fewer returns.
- Despite these efforts, return rates remain relatively stable, according to the EHI study, with an average of 6-10% across all product categories, with 58% of retailers reporting no change, 21% an increase, and 15% a decrease.
- Online retailers are hesitant to pass on return shipping costs to customers, with only 14% utilizing this option, according to EHI, due to competition and customer expectations, although many cover the shipping costs themselves.
- During the upcoming Christmas period, return volumes are expected to increase significantly, but the German Parcel and Express Logistics Association and market leader DHL do not anticipate any logistical challenges, with returns being managed within existing delivery capacities.
Source: www.stern.de
