eCommerce returns reduction can be an impactful technique for improving the environmental impact of online retail. We recently summarised seven ideas for a Sustainable eCommerce Returns Strategy, with technology developments playing a significant role.
Newmine has created Chief Returns Officer®, an AI-driven platform that brings together millions of data points with the sole focus of reducing returns rates. Bringing together eCommerce data from a range of systems, Chief Returns Officer aims to drive meaningful actions to reduce returns, reduce environmental impact, and increase profits.
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We spoke with Founder and CEO of Newmine, Navjit Bhasin, to discuss the solution in more detail and understand how retailers can start making a meaningful sustainability impact through returns reduction.
What are your views around the impact of online returns on the environment and the benefit of returns reduction?
Returns cause significant strain on our planet. Because customers took notice, incinerating returned product is becoming less and less frequent.
Still, there are billions of pounds of returned goods that end up in landfill. But that’s only one piece of the puzzle. The volume of returns has exploded by 95% over the last few years, and so there is the increased diesel fuel and carbon emissions, for products to get delivered and sent back. Apparel, unfortunately, also happens to have the highest return rates and already have the highest environmental impact of any industry.
As time goes on the impact of returns on the environment is greater and greater. Consumers are starting to wake up to the reality of the impact that our behaviour has on the planet. The stats are staggering—for example, we see how many people are displaced due to weather and destructive environmental factors like hurricanes and rising tides.
And average shoppers see this, so consumers are becoming more concerned about making sustainable purchases and changing to more sustainable shopping practices. For example, BOPIS [Buy-Online-Pick-Up-In-Store] is a rising trend with shoppers, which may be due to increasing concerns with sustainability.
I have to give credit to Millennials. I think they’re more aware and savvy about the environmental impact than generations before them. So, I’m hopeful that there will be a change in our current returning behaviour, but education is vital.
Do you feel the eCommerce industry as a whole has a good handle on both the business & environmental impact of returns reduction?
The short answer is no—to both of them [the business impact and environmental impact]. In fact, in terms of business impact, we see all these retailers filing for bankruptcy. No one is immune to bankruptcy.
Forever21, Gymboree and several others filed Chapter 11 this year. Retailers have to be diligent about maintaining their bottom lines and returns are a significant expense.
Every USD 1M in returns reduces the bottom line by USD 0.5M. In terms of environmental impact, I think for a period it was fashionable to talk about or market sustainability, and retailers are hesitant to dive in because it will increase costs that they will then need to put on the customer.
Businesses are catching up to where the consumers have been. We see that with new business models like clothing/furniture rental services and consignment, like ThredUp. I think some companies are better about what they do with products that are returned, such as refurbishment and remarketing, rather than throwing it in landfill. The whole process of returning has an environmental cost.
For any eCommerce store, an attractive returns policy is essential. How do you feel retailers can reduce returns without compromising on customer experience?
We’re at a point now where some retailers are encouraging people to buy more and return, to make the sale without considering the ramifications. For a company looking to be more sustainable, this practice should be discontinued. Customers are buying things with the intent to return, without knowing how harmful that is to the environment.
“Customers are buying things with the intent to return, without knowing how harmful that is to the environment. This practice should be discontinued”
Navjit Bhasin, Founder and CEO, Newmine
One way to discourage this customer practice is to require a nominal fee for returns that are made for reasons out of the retailer’s control, such as bracketing [buying multiples of the same item with the intent to return]. Retailers are hesitant to do this because free returns help convert online sales.
The industry encouraged this type of consumer behaviour, and now it’s challenging to reverse. It requires education during the shopping experience. If your customer base is concerned with sustainability, then communicating how returns impact the environment and encouraging them to return the product to the store (BORIS, “buy-online-return-in-store”) can be a good strategy.
Another thing you can do is appeal to social norms. When hotels want people to reuse their towels, they have signs with “Join Our Guests in Reducing Water Waste: Most Guests Use Their Towels More Than Once.” That strategy should be tested in retail, for example, “Most Customers Prefer to Return In Store, Resulting in Less Emissions” because it’s been shown to be effective due to the social pressure.
Customers aside, there are 65% of returns that are happening that can be avoided, for reasons like the incorrect item was shipped, or the product didn’t match the web description. These are returns retailers can start reducing today that will have a significant financial and sustainability impact, and even a 1-3% decrease in return rates can save retailers millions.
How does Newmine technology approach reducing returns?
When we started to build Chief Returns Officer®, we knew that the returns reduction process required four key factors:
- Root cause identification
- Timely analysis of data,
- Collaboration across organizational silos
- Prescribed actions
So, we built the software around these four pillars.
Returns-relevant data from OMS, POS, PIM, CRM, and even Voice of the Customer data from online reviews and call centre transcriptions are synthesized in the software and analyzed in near-real-time to identify the root cause of returns. From there, the software prescribes actions to take to diminish the return spikes (recommendations like “pull products for QA” and/or “update website copy” are a couple of examples) based on the root cause.
Those actions are populated into a cross-enterprise collaborative workflow. Once you take a prescribed action, you record it, and the system measures the success of that action to ensure a downward trend in returns. It does this 24/7/365 days. So you can take action in season.
In the broader sense, the software helps reduce returns because each functional area in the product lifecycle has the intelligence it needs to operate more effectively. Analytics have been used for years to predict purchase behaviour and sales, but how can we say we have a full picture of customer experience and satisfaction if we’re only looking at a product sold, without paying attention to what’s being returned.
Assortment planning, inventory positioning, supplier performance, and marketing decisions become better informed because retail employees have access to a comprehensive view of how products are performing. And the outcome is an overall reduction in returns.
As an eCommerce industry, we have created and championed the consumer behaviour of “buy more, return what you don’t want”. How do you feel we can approach reversing this and creating a returns reduction?
Retailers need to educate customers on how returns impact the environment. If someone can spearhead that initiative, it will pay dividends in the long run. The consumers have been spoiled by Amazon, Zappos, and Alibaba, it’s going to take some big players to start reversing the trend, but we have to start somewhere.
Another thing to consider is that if you’re going to take something away, you better replace it with something better. I think the better jobs retailers do upfront with their product information; the fewer customers will return. The best return is one that never has to happen.
For an online retailer reading this, what would be your top recommendations for a more sustainable returns policy and overall returns reduction?
Sustainability is about longevity, and right now making returns completely free is just encouraging more of the same behaviour. I hope what we’ve communicated is that returns occur for more reasons that have nothing to do with policy. To improve their financial health and sustainability efforts, retailers need to start making a dent in the 65% of returns that happen that they can control.
Once we [retailers] start doing our part in reducing the impact of returns on the environment by tightening-up our supply chain and operations, then we can lead by example for our customers.
Further Reading: Sustainable eCommerce Returns Strategy. Read More