The war between the retail/e-commerce customer experience and increasing costs is heating up, thanks to the impact that rising transportation prices are having on the retail process. That trend plagues e-commerce players and retailers, both large and small. For example, in July 2018, spot market trucking costs were up 30 percent year-over-year, according to DAT. Increases have been reported every month for the past 18 months, with spot market loads up 105 percent to date in 2018.
And then there is the cost of the actual product and the cost of the product return disposition. High-end retailer Burberry destroyed $38 million of unsold and return product this year. That totals more than $400 million over the past five years, according to industry estimates. To protect the brand and limit reverse logistics expenditures, would you burn $400 million of product?
Recent press reports dinged two other globally known retailers for hole-punching returned product. That product was recycled to the trash. Talk about hole-punching your bottom line, as well as the brand's environmental rankings.
Every year, more consumers bracket-buy more than one of the same item for size, color match, and quality. Shoe returns are three times higher than all other e-commerce purchases, according to industry reports.
E-commerce players will have a tough time changing that consumer behavior given the nature of online shopping because of what numerous surveys show conclusively: Online buyers are loath to shop on sites where returns are difficult and expensive.
Just like bricks retailers (think Home Depot), a liberal returns policy solidifies brand loyalty and additional business that builds over time. For the consumer, it's all about getting unwanted product back, and receiving a refund quickly. In-home inventory may be a thing, but it's not popular.
Omnichannel retailers can motivate e-commerce shoppers to head to the store in the hopes of capturing additional sales, and leveraging the infrastructure as a reverse logistics facility, even though it is typically ill-equipped for that task.
That strategy has some appeal, but it is limited by geography and the time involved to process that return. Some e-commerce enterprises use "returns bars," but time and distance to return an item limit the convenience appeal for some consumers.
A commitment to demand-driven logistics practices certainly will help by limiting product overages, but there is no easy solution to reducing the friction between enhancing the customer experience and cutting ever-increasing returns costs. How are you handling this challenge? Let us know at email@example.com.