COVID-19 has changed the world.
Every facet of life is a little bit different; everybody has had to flex and adapt, and businesses have had to diversify and innovate to match the changing behaviours of their clients, customers and supply chain partners.
Before the word coronavirus abruptly entered into our vocabulary, e-commerce was already a major – and ever-increasing – force in the retail world. Total revenues in 2018, according to the Office of National Statistics (ONS), sat at £688.4 billion, with B2C sales via websites also sharply rising to £199.7 billion. What’s more, 82% of individuals made online purchases in 2019, emphasising the strength of a market that was already set for 34.5% growth in 2023.
ASCG’s own data backs up this point, showing the power of selling tools on social media platforms – these encouraged 34% of consumers to buy more on impulse. This trend has been supported by the rise (and rise) of the interiors Instagrammer, whose influence has made phones a constant source of inspiration for the latest homeware trends. In fact, penetration of online shopping among smartphone users in the first quarter of 2019 was 44%. Undoubtedly, this has been exaggerated during lockdown, as people spend more time at home – unable to go shopping for large ticket furniture items.
However, with impulse comes indecision after the fact, resulting in a fifth (22%) of online shoppers returning more items. The absence of ‘try before you buy’ in the online sphere, means consumers are placing a stronger emphasis on their right to change their mind and send back unwanted goods. Returns have always had a place in the shopping cycle – COVID-19 and the resulting lockdown have crystallised this vital area of retail.
It’s little wonder that when you browse online sites returns have taken a more prominent place on the homepage. Extended terms, far beyond those normally offered, are celebrated in clear banners, encouraging people to purchase items in the knowledge that if it’s not right it can be returned hassle-free. According to ONS, 30% of multichannel retailers are already offering free returns by post on online orders in 2020 – a statistic that has undoubtedly risen since 23 March.
It’s that very issue of free (or not so free) returns that rankles with consumers. ASCG data shows that 22% of online shoppers find paying for returns the biggest frustration, closely followed by waiting for a refund (20%). It’s an essential, but often much-maligned part of the supply chain and it seems the coronavirus pandemic has only shone a brighter light on the issue.
So, while certain retailers are flexing and adapting to the changing behaviours of consumers, by extending terms and offering an easier way to return items, is this part of a wider strategy, or just a temporary incentive in response to the unprecedented situation we currently face? Are supply chains in the homeware retail market geared up for the long term, in order to keep customers happy? And, if not, how should retailers approach returns and adapt strategies to gain competitive advantage in the future?
The key is to make returns customer-centric and not driven by cost. Retail experts often wax lyrical about frictionless shopping, unrivalled customer experience and how to achieve a seamless checkout process. But, the issue of returns is the one piece of the puzzle that always seems to be neglected when it comes to achieving increased profits and higher margins.
The stats certainly seem to stack in the favour of returns. According to figures from Accenture, having an effective returns process can increase profits during the first six months of implementation by between 22 and 46%, with the top 5% of returners making up nearly a third of retailers’ most profitable customers. So why is it often managed out of a business? Why are decisions on returns and reverse logistics based purely on cost and not on the behaviour and habits of those willing spenders?
The most forward-thinking companies are those that are contradicting the theory that returns are a plague attacking profit margins. Instead, they’re moving away from making policy and sales decisions that limit customer purchasing, where there’s a higher probability of items being returned, and embracing the topic and investing in reverse logistics.
If we want to translate the ‘frictionless checkout process equals higher conversion’ mantra into those items coming back into the business, then retailers must adopt a more progressive approach. This includes extending the 28-day period for returning an item; adopting longer cooling-off periods; and opting for speed and a streamlined process at both ends to enable greater transparency on stock movement, increased quality control, and quicker resales. Part of that approach is creating a robust end-to-end supply chain that enables free flow of products, whether they’re sales or return. Having an independent status, and established relationships with leading carriers, results in preferential rates that can easily be passed on to retailers, creating enhanced margins whether stock is coming or going.
The reality is that returns are becoming an increasing part of online retail, reinvigorated by the COVID-19 pandemic and changing consumer attitudes. Adversity must be seen as an opportunity – a time to take stock and think differently. Now is the time to embrace returns; incentivise customers to do so, if necessary; engender loyalty; and create innovative approaches to returns that mirror the effort and investment afforded to sales.