The returns epidemic is one of the biggest concerns facing retailers so what can be done about it? Dean Frew, CTO & SVP RFID Solutions at SML Group, offers a solution
The retail industry is currently facing an epidemic. In the past, commentators weighed in on trends such as ‘the death of the highstreet,’ how to obtain and retain brand loyalty and how to improve customer experience.
However, whilst the industry was debating these issues, another challenge began emerging. A challenge that could be costing retailers significant profits - the returns epidemic.
According to a report by the Financial Times, the average returned product passes through seven pairs of hands before it arrives back to the store. In the UK alone, it is estimated that returned items are costing retailers an average of £60 billion a year.
It could be argued that the reason retailers are witnessing greater returns is down to changing consumer behaviour. The article in the Financial Times suggests that a large number of consumers are ‘hedge spending’ whereby they are buying items at full price with the knowledge that they can return them with ease if they are discounted at a later date.
Another argument for the noticeable increase in returns could simply be down to how straightforward retailers have made the process for customers.
A recent survey by Barclaycard found that 30% of British shoppers admit to over-ordering clothes with no intention of keeping items yet, 47% of those surveyed also said that they would not over-order items if they had to pay to return them.
So how are product returns impacting retailers so significantly? The main factor influencing profits so much is because these products are becoming held up in processing through the supply chain. Companies around the world are struggling to manage volume of returns effectively. By the time a product arrives back in store and is put back on the shelf, the process has been so slow that the item is often out of season or no longer being sold in store which means retailers are either having to sell the product at a discounted price or send back to the supplier. This leaves retailers in a position to reconsider their reverse supply chain in order to overcome this challenge.
Speeding up the reverse supply chain
In order to address the returns epidemic and ensure that retailers are keeping profit margins as high as possible, they need to make sure the returns process is much more efficient. More retailers are beginning to adopt game-changing technology such as Item-Level RFID in order to simplify this process.
The use of RFID has established itself as a highly effective tool to manage inventory throughout every stage of the supply chain. However, it can also be used as a tool to effectively trace inventory through the reverse supply chain and help retailers eliminate the time spent manually processing returns; enabling products to get back in store at a much faster rate.
Already a number of large retailers are looking at using RFID solutions to streamline their reverse supply chain processes and operations. RFID tags allow items to be read in bulk and accepted into a processing queue and provide the ability to prioritise items to process and speed-up movement of items back into a sellable status.
An industry working together
With the evolution of technology and rise in online shopping, the apparel retail sector has seen a huge surge in growth and significant opportunities presented. For example, online-only fashion retailers such ASOS and Boohoo have both reported significant profits with £1.75 billion and £265 million respectively.
However, this growth may be hindered due to these companies’ free return policies and they could see these profits hit by the amount of stock becoming held up in the reverse supply chain. With these opportunities also comes challenges and the returns epidemic is one that is swiftly becoming the most prominent.