Higher transportation, labor, and warehousing costs are driving up returns costs. According to the latest Returns Index Survey from the Reverse Logistics Association (RLA), 55% of survey respondents noted increases in both the number and volumes of returns during the second quarter.
Since RLA started its Returns Index Survey last year, returns costs have been a particular concern. Among the comments that survey respondents have made include:
• “Labor increases and required surge pay needed for lack of labor.”
• “Mainly driven by the cost of freight.”
• “Returns take up a lot of increasingly expensive warehouse space, and transportation costs are rising.”
Like “free shipping,” “free returns” policies are evolving to reflect retailers’ higher supply chain costs. Buy Online, Pickup in Store (BOPIS) has become the new “free shipping” option that retailers are offering to customers. Otherwise, the faster customers want an item, the more they’ll likely pay for such convenience.
Likewise, “free returns” policies are being scrutinized. Retailer Zara, for example, recently revised its returns policy by charging customers $2.00 to $4.00 to return items by mail.
However, a return fee does not impact returns to Zara’s stores. By getting customers to return items directly to a store, retailers save on transportation costs and time to process returned goods. In addition, increased foot traffic into stores is likely to result in a purchase.
RLA members Best Buy, Walmart, and Amazon have generous returns policies. Best Buy’s Totaltech members have a longer time to return items than nonmembers and no restocking fees. Plus, members also receive free two-day shipping.
Walmart, meanwhile, offers customers up to 90 days after purchase to exchange or return (note: there are some product exceptions). Customers can return items in-store for free by mail or a scheduled pick-up from the customer’s home.
Amazon allows returns at 18,000 physical locations, including the ability to drop off items without a box or label at Kohl’s, UPS, and some Whole Foods stores. There’s also a Try Before You Buy program for Prime members designed to make returns for clothes even easier, with return labels already included in the box. And, like many retailers, Amazon allows customers to keep some “returned” items while still refunding them.
Retailers cannot grow their business without looking at the end-to-end cost of their business, including businesses’ reverse logistics costs. Zara recognized these costs and will likely become stronger because of the change in its returns policy.
One of the best ways to mitigate returns costs and volumes is to keep returns from happening in the first place. While this is highly unlikely ever to happen, improving websites, for example, can help mitigate some returns from occurring.
For example, the rise in e-commerce has generated large volumes of returns due to the practice of bracketing. Bracketing involves customers buying multiple sizes or colors of an item knowing they will return some of what was purchased.
Bracketing can be mitigated by retailers improving their websites to offer realistic sizing charts, improved color quality and description of items, and introducing such capabilities as virtual dressing rooms.
While returns are not going to ever disappear entirely, there are ways to mitigate costs and manage the volumes.
Tony Sciarrotta is Executive Director of the Reverse Logistics Association. The RLA offers various tools, white-papers, and monthly webinars that provide best practices in managing reverse logistics.
This article originally appeared in the July/August, 2022 issue of PARCEL.
