Automation can battle the dark side of returns
13 June 2016
Returns has long been the dark side of eCommerce and if anything the problem is getting worse, with many companies reporting 50% returns rates. But you don’t have to sit and take it - Swisslog shows how warehouse automation can be the key to streamlining returns management.
There is a great disturbance in theForce. No, not Luke Skywalker, but the dark and powerful presence of returns. Returning goods is not a new phenomenon, but the rise in e-commerce has seen a stark change in consumer buying habits prompting a sharp increase in returns.
The value of returns is now staggering – in 2015 research from the retail analyst firm IHL Group put the global cost of returns at £425.6 billion per annum. IHL’s report suggests that Europe accounts for 43.7% of all returns globally.
This is exacerbated by peak seasons. For the UK’s Black Friday, 2015 revenues soared to around £890 million, with a following rise in returns. Some have taken somewhat draconian measures to returns; one UK retailer having even sent returned bicycles straight to landfill. Even a sought after retailer may experience returns of 20%- 30% of shipped items, all pushing up inventory value and putting a strain on cash flow.
Retailers must deal with returns and there are a number of areas where they can make an impact.
For example, fashion retailer ASOS.com is trialing click-and collect services with integrated changing rooms. Immediately after picking up their parcel at the collection point, customers can try on the items in a changing room. If it doesn’t fit, or is not to their liking, it can be returned at the parcel collection point.
This process ensures that returns are sent back much faster. This is crucial for the customer experience of the honest returner who may find they can more accurately get what they wanted and can discourage the over-orderer from buying multiple versions of the same item.
Keeping the customer informed about returns may also have a psychological impact, with anecdotal evidence suggesting having a rapid turnaround and keeping customers informed during the returns process, including when the item is received and when they can expect their refund, deters further abuse of the process.
Of course, the challenge for business is not simply the idea of the customer ‘getting it right’ or forcing customers to keep unwanted items. The true challenge arises in the warehouse where logisticians are left to pick up the pieces.
One area where the inventory manager and the consumer agree is on the need for speed. The consumer wants to be able to return goods easily and freely, and receive their refund as fast as possible.
Retailers strive to re-sell the item which may be subject to expiration dates of seasonal demands. Reintroducing the stock for re-picking and repurposing items where necessary helps to maintain stock value and reduce overall supply chain costs.
Within the warehouse, automation can often provide the support necessary to streamline the returns management process. Businesses should ensure that both manpower and equipment are sized to cater for the additional capacity that returns require.
Solutions using random put away, a reverse picking process using smart storage solutions and automated movement of totes should be considered by e-tailers and omni-channel retailers alike, looking to optimise their returns processes.
James Sharples, managing director for Swisslog UK says: “For retailers the whole returns business means extra work. They have to pick items for sale; then they get it back. They’ve got to put it back in stock or repurpose it to be able to sell it again.
“E-commerce’s popularity is in part due to the ease of which we are able to buy without seeing it in the real world. People are much more willing to take a risk on something that can be sent back easily. There’s increased volume for the retailer, but there’s increased costs in double-handling unsold stock.
“To compete in today’s market retailers are offering free returns. If a lot of people choose to buy from a certain website because the returns process is so easy, that can become a driver in the market but it’s a double-edged sword. You get more custom because you offer a really good returns policy but you are going to get more returns off the back of it.”
To ensure returns don’t spiral out of control, download the Swisslog white paper and revamp your warehouse operations.
The force is with you!