Solving Retail's Online Supply Chain Challenge
The rise of e-commerce has led to significant growth for retailers in Australia, with online retail in the country exceeding $53.31 billion in 2022 - according to The NAB Online Retail Sales Index. However, with the surge in online shopping, there has also been a rise in returns, which can be costly and have a significant impact on the environment. In this blog, we will discuss how Australian Retailers can improve their online returns processes to reduce cost and waste by investing in strategic partnerships and technology. We will also highlight the innovations in this space and the need for retailers to assess trade-offs in real-time and capture returns information.
The frequency and cost of online returns
The proportion of online sales that is returned can vary depending on the type of product, the retailer, and the consumer behavior. However, studies have shown that the return rate for online purchases is generally higher than for in-store purchases.
According to a report by the National Retail Federation, the average return rate for online purchases in the United States is around 30% - we would expect this to be consistent in Australia. However, the return rate can be significantly higher for certain product categories, such as clothing and footwear, which can have return rates of 40% or higher.
It's important to note that returns can be costly for retailers due to shipping and handling fees, restocking costs, and potential losses from damaged or unsellable items. A report by the Reverse Logistics Association, highlights the average cost of a return can range from $5 to $30 per item, depending on the product category and the specific circumstances of the return. However, the cost of returns can be higher for some items, such as large or heavy items that are difficult to ship or items that require special handling or disposal. As a result, many retailers have implemented policies and procedures to reduce returns and make the return process more efficient for both the retailer and the customer.
Returns are an essential part of the online shopping process, but they can also be costly for retailers. The cost of returns includes the cost of processing the return, restocking the item, and the cost of shipping the item back to the warehouse.
According to research, retailers in Australia spend around $2.2 billion a year on processing returns, and this number is expected to grow in the coming years. In addition to the cost, the returns process can also be time-consuming for retailers and frustrating for customers.
The impact of returns on the environment
The increase in returns also has a significant impact on the environment. When items are returned, they often end up in landfills or are incinerated, leading to more waste. According to the Australian Bureau of Statistics, in 2019-2020, the amount of waste generated in Australia was 67 million tonnes. If retailers do not improve their returns processes, this number will continue to grow, and the impact on the environment will be significant.
Investing in technology
Technology has been a game-changer for the e-commerce industry, and it can also help retailers improve their returns processes. By investing in technology, retailers can reduce the number of returns and improve the returns process for customers. Some of the technologies that retailers can invest in include:
- Virtual sizing tools
One of the most common reasons for returns is that the item does not fit the customer. Virtual sizing tools can help customers to choose the right size by allowing them to enter their measurements or by using a virtual try-on feature. By providing customers with accurate sizing information, retailers can reduce the number of returns due to sizing issues.
- Augmented reality
Another technology that can help retailers to reduce the number of returns is augmented reality. With augmented reality, customers can see what a product will look like in their home before they make a purchase. This can help to reduce the number of returns due to the item not looking like the customer expected it to.
- Customer reviews
Customer reviews can also help to reduce the number of returns. By providing customers with access to reviews from other customers, retailers can help customers to make more informed purchasing decisions. This can help to reduce the number of returns due to the item not meeting the customer's expectations.
- Chatbots
Chatbots can help customers to get quick answers to their questions, which can help to reduce the number of returns due to customer confusion. By providing customers with accurate and timely information, retailers can help to reduce the number of returns.
Innovations in the space
Several organisations are addressing the challenges of online returns.
One such organisation is Happy Returns, which provides retailers with a network of physical locations where customers can return items. This service is ideal for customers who prefer not to ship items back or for retailers who want to reduce the cost of shipping. Happy Returns also provides retailers with real-time data on returns, which can help them to make better decisions about inventory management and product development.
Another organisation that is making a difference is Refundid, which has developed a technology that can automatically process refunds for retailers. This technology can help to reduce the time and cost of processing returns, as well as improve the accuracy of the refund process. Refundid also provides retailers with real-time data on returns, allowing them to make more informed decisions about their inventory and customer service.
Parcel Point is another organisation that is helping retailers to improve their returns processes. Parcel Point provides a network of local drop-off locations for customers to return items. This service is convenient for customers who do not want to ship items back and helps to reduce the cost of shipping for retailers. Parcel Point also provides retailers with real-time data on returns, allowing them to make better decisions about their inventory and customer service.
Australia Post is also making a difference in the returns space. The organisation has introduced the Parcel Locker service, which allows customers to pick up and drop off parcels at 24/7 accessible locations. This service is ideal for customers who are not home during the day or for those who prefer not to interact with couriers. Australia Post has also introduced the Return Mail service, which allows retailers to include a return label in the original shipment, simplifying the returns process for customers.
Assessing trade-offs in real-time and capturing returns information
Improving the returns process is not only about investing in technology and partnerships, but it is also about assessing trade-offs in real-time and capturing returns information. Retailers need to be able to make informed decisions about the returns process based on real-time data. For example, retailers need to know which items are being returned the most and why they are being returned. This information can help them to make better decisions about their inventory and product development.
Capturing returns information is also essential. Retailers need to know what items are being returned, why they are being returned, and in what condition they are being returned. This information can help retailers to improve their product development, inventory management, and customer service. Additionally, retailers need to be able to use this information to make data-driven decisions about their returns process, such as whether to invest in a partnership with a carrier or a third-party logistics provider.
The increase in online shopping has led to a surge in returns, which can be costly and have a significant impact on the environment. However, by investing in technology and strategic partnerships, retailers can improve their returns processes and reduce costs and waste. Innovations such as Happy Returns, Refundid, Parcel Point, and Australia Post are making it easier for retailers to manage the returns process, and capturing returns information and assessing trade-offs in real-time is critical for retailers to make informed decisions about the returns process. By taking these steps, retailers can improve the customer experience and reduce the environmental impact of returns, making online shopping more sustainable and cost-effective for everyone.
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