Friday, May 14, 2021

Customer returns hit retailer profits but boost shipping companies

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U.S. consumers are expected to return a record $ 115 billion in unwanted goods purchased during the holiday season, putting more business in the hands of delivery companies, but knocking retailer growing profit margins and concerns about environmental impact.

Retailers had to deal with millions of additional items to process following a increase in e-commerce orders, which the consultants found were about three times more likely to be returned than purchases in physical stores.

Clothing items purchased online are particularly susceptible to return, as buyers who cannot try on them on order have several variations of different sizes and colors. Gifts also have above-average return rates.

Yet the relentless increase in online shopping during the pandemic led the phenomenon to spread to a wider range of products this year. As several U.S. retailers have streamlined the returns process, consumers are increasingly willing to try products in a range of categories – including home and electronics – knowing they can return them with minimal hassle, said Tobin Moore, managing director of Optoro, a retail technology company. company.

“People take more risks with the products they buy online,” he says.

Optoro expects a 15% year-over-year increase in the value of products purchased in stores and online that are returned between Thanksgiving in late November and late January.

The increase in two-way traffic is helping fuel a boom for logistics groups. FedEx, whose sales in its last quarter were loudest ever thanks to the surge in online shopping, said in December that he expected “record” levels of returned packages “to continue over the next few months.”

Returns are expensive for retailers, not least because the resources expended to sell the product are wasted. The processing of returned items is complex and merchandise that would otherwise be available for purchase is withdrawn from circulation, requiring additional inventory.

Even so, retailers stand to lose if they try to dissuade shoppers from making the habit, said Sucharita Kodali, former head of the Saks department store chain, who is now a retail analyst at Forrester.

The highly competitive industry offers customers many options, she said. “Consumers won’t buy from retailers in the first place if they don’t like the return policy,” she said.

According to Ms. Kodali, about half of returned merchandise has little or no salvage value. In the past year in the United States, according to Optoro, nearly 6 billion pounds (2.7 billion kg) of returned goods – or about 6,700 fully loaded Boeing 747s – could have gone to landfill.

The disruptions during the coronavirus prompted several retailers to relax their return policies, further encouraging the trend. The American department store chain Kohl’s offers its customers more time to return items to the store. Walmart, the nation’s largest retailer, has launched a new service called Pick up by carrier in partnership with FedEx.

Walmart said that over the past year it has been able to recycle many returned items. The company said last year it produced around 1.9 million pounds of recycled plastic resin that would be reused to help make more than 9.2 million products.

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