Refunds Without Returns? Here's Why You Shouldn't Tell Your Customers To 'Skip It'
by Laura Gee
The boom in eCommerce as a result of the global pandemic won’t be news to you. With non-essential retail stores in the UK closed for so long, UK shoppers have depended on online shopping to refresh their wardrobe - swapping out sweatpants for summer dresses in preparation for the end of lockdown on 21st June.
Over the last year most of us have either been couch potatoes or fitness fanatics (or, like me, a constant flip-flop between the two). This poses an extra challenge for retailers as shoppers need to figure out their sizing all over again - inevitably leading to a rise in returns. Many retailers have already clocked on to this, and have started implementing solutions to help keep their returns under control.
And we applaud their efforts.
As a company focused on making returns more sustainable for retailers, we’re firm believers that not all returns should be sent back. In many cases, it doesn’t make financial or environmental sense to be shipping low value items all the way back to the UK, particularly from across the pond in the USA or Australia.
Amazon and Walmart are the most recent retailers to hit the headlines for telling consumers to ‘skip’ returning - offering up a refund without the shopper even needing to send it back.
So why are the online giants seemingly throwing money away? And what does this trend mean for the shopping habits of consumers – and the effect online retail has on the environment?
Why are retailers letting shoppers keep their products?
On the face of it, it looks like Amazon and Walmart must be missing out by telling customers not to bother returning unwanted items, but we’re talking about huge businesses here so financially this won’t even scratch the surface for them.The danger lies in their huge influence over retail which means that consumers could quickly come to expect the same treatment from other brands who simply can’t match the offering without gaining a pretty significant dent in their bottom line.
So why would retailers be content to simply give away a product that could be resold? Is it a gesture of good faith to their customers in a troubling time? A generous gift to encourage brand loyalty?
The truth is much simpler:
Returns can be costly.
Between the costs of shipping, warehousing, inspection, and customer service, returns can be an expensive game for retailers. Especially if they’re offering free returns and shouldering all of the cost. For every item their customers don’t want, there’s a hidden formula at play:
Does the cost of processing a return outweigh the potential revenue of selling it again?
Companies like Amazon and Walmart are using artificial intelligence to compare the costs and benefits of processing a return on any item. If the AI decides a return isn’t worth it, they’ll send out a refund and tell the customer to keep it.
In some cases (like a product that’s faulty or broken) it can be a no-brainer. If the retailer doesn’t have salvage capabilities or cannot reclaim for faulty items from the manufacturer, there’s no business value in a product that won’t be sold. So why spend money bringing back something useless?
But in many cases, they’re leaving a perfectly good product out there in the hands of someone who doesn’t want it – simply because it’s deemed more cost-effective to leave it where it is.
The customer gets their money back without the hassle of arranging a return – and they might decide to keep and use their free product after all.
The retailer cuts their losses and avoids any further expense – and they might end up with a customer who’s more happy and loyal as a result.
But when you dig a little deeper, it’s not just as simple as telling your customers to keep it.
So, what’s the problem?
While Amazon might be onto something by telling their shoppers to ‘skip it’ - referring to skipping the returns process - shoppers are left to their own devices, and the language doesn’t work across the pond. In the UK, “skip it” is synonymous with throwing something in the bin, which if you’re a shopper with your hands on what is essentially a free item that you don’t want, or is broken, binning it might already be your first thought. And here lies the problem.
“Skip it” creates a wasteful mindset.
In the fashion industry alone, 50% of shoppers are already throwing their clothes in the bin, dumping £140 million of unwanted clothing each year.
That’s 350,000 tonnes of clothing a year that ends up in landfill.
When you give shoppers a refund and tell them to keep the product, that item loses all perceived value. If they don’t need to send it back to get their refund, then why should they worry about what happens to it?
And if a retailer doesn’t care enough to want it back, that’s an attitude that rolls over to the consumer.
And yet, there is potential for a much more circular model to be adopted - research shows that as much as 95% of clothing that is thrown away, could in fact be reborn, recycled, or upcycled but is mindlessly disposed of. So when retailers tell shoppers that their products don’t matter, it’s a huge blow to the efforts of every company and consumer that’s trying to protect the environment.
There’s also potential for abuse - a risk that your fraud team would be the first to point out. If you’re giving out refunds without requiring the item to be sent back, it won’t take long before your customers catch on.
Some devious shoppers will figure out how to game the system, buying more than they need in the knowledge that they can easily claim a full refund and still get to keep the products.
It’s too early to say how common this kind of tactic will prove to be. While Amazon has been telling their customers to skip their returns on select products for a long time, it’s taken a global pandemic and a frenzy of online shopping for policies like these to come into the public eye.
What should retailers do?
From a business perspective, it might not make sense to process a return that’s not worth the cost, particularly if you’re covering the full cost by offering free returns.
But that doesn’t mean you need to give up control of your products. And it doesn’t mean you need to add to the ongoing excessive waste that’s damaging our environment and encouraging an unsustainable industry.
Telling customers to ‘skip’ returning is undoubtedly the easy way out. A potential ‘quick win’ for the books in lieu of implementing a proper solution. But with 57% of consumers saying they check a retailers sustainability policy before making a purchase, it’s a lazy solution with the potential to be caught out when shoppers realise what is happening. If we learnt anything from the coverage of the Burberry Bonfires in 2018, it's that there certainly is such a thing as bad press. .
A real problem requires a real solution.
And this requires retailers conducting careful analysis to spot other areas within the return journey where costs can be minimised. This includes assessing the range of return carriers used, for example, is it really necessary to offer an express returns service and paying a premium for home collection when shoppers may have been happy to return via a more cost-effective drop-off service?
By working with ReBOUND, retailers are able to take advantage of our global consolidation network to bulk-ship returns back to the final warehouse destination, reducing the overall end-to-end return costs. This also gives greater flexibility to control the speed of returns - accelerating the refund to keep customers happy, but slowing down the logistics. For example, you can trigger the refund process at first scan once it's been received by the carrier, which means there's less urgency to get the goods back to their final location, so you can switch to slower and cheaper options such as sea freight instead of air freight, which both reduces the carbon footprint and costs.
In short, we were empowering retailers to slow down the journey to reduce costs - whilst giving them the required data to speed up the refund so shoppers weren’t impacted.
“From our own data, we found that 72% of shoppers are willing to pay for a sustainable return method – and 47% said they would be happy to regift their return to a charity instead of keeping it,” said Emily Cotterill, Head of Sustainability at ReBOUND.
“In the last year, the world has seen a wave of movements pioneered by the likes of David Attenborough with his Netflix hit ‘A Life on Our Planet’, and Greta Thunberg’s BBC Documentary ‘A Year To Change The World’ - meaning shoppers are emerging from lockdown with a much more sustainable mindset. Our latest survey even revealed that 95% of shoppers are more conscious of their environmental footprint since watching David Attenborough’s documentary! This means UK retailers need to get ready to step up to the challenge – taking responsibility for where their products end up, and helping to reduce the massive impact that returns are having on the environment.
When you tell your customers to skip their returns, you’re leaving them with all of the responsibility. There’s a small chance they might go out of their way to recycle it or donate it to a charity – but they might also just bin it.”
By partnering with ReBOUND, retailers have access to a fully managed returns network, smarter routing and a range of value-added services, such as diverting returned products to a charity or a recycling plant before they reach your business – ensuring that you’re not stuck with an item you can’t sell – one that’s incurring costs and taking up valuable space in your warehouse, nothing goes to waste or ends up in the bin and you’re protecting yourselves against the potential for returns fraud.
If you can’t completely avoid your “skipped” returns, the next best thing is to make it as easy as possible for your shoppers to do the right thing with their products.
Whenever your shoppers get to keep a returned item, give them specific advice about the options they have in their area – their local recycling points for faulty or broken products, or their local charity shops for items that aren’t a good fit.
Ready to get a grip on your returns?
With the ongoing pandemic and the rising growth of online sales, returns are looking bigger than ever – and so is the cost to your business and the environment.
But you don’t have to let them spiral out of control.
If you’re looking to take the reins on your company’s unwanted stock – saving time and money, and improving your sustainability – get in touch with one of our team to find out how ReBOUND can help.