As the shift towards online and mobile-only sales gathers pace, many retailers are struggling to cope with the impact a culture of overbuying and excessive returning is having on margins. Andrew Smedley, head of e-commerce and logistical packaging at Antalis, examines the growing trend for ‘try before you buy’ and why businesses need to ensure their packaging is ‘returns-ready’.
THE advent of online shopping, while a progressive step forward in ease and convenience, has undoubtedly changed the face of retail beyond recognition. For one thing, e-commerce – currently the fastest growing retail market in Europe and North America – has allowed many businesses to explore new markets and achieve significant growth. For instance, during the Black Friday weekend last November UK consumers spent a record £8 billion, up 8% on 2016, with 81% of purchases made online – resulting in record profits for the likes of John Lewis, Amazon and JD Sports.
At the same time, the ease of online shopping has fundamentally changed customer behaviour. Where once, consumers would walk into bricks-and-mortar stores to see, test, feel and try-on products before purchasing, the rise of hassle-free incentives such as free delivery and returns mean customers are now much more inclined to over-purchase as a way to ‘try before you buy’.
According to latest research from Barclaycard, 30% of shoppers deliberately over-purchase then return unwanted items – a figure set to soar dramatically in line with the rising proportion of online sales. For some of the UK’s largest retailers though, the cost of servicing these returns has spiralled to almost £60 billion a year, which doesn’t account for the revenue lost when goods are damaged or go missing during the returns process. As a result, with nearly half (47%) of those consumers saying they wouldn’t order an item if it couldn’t be easily returned, this has left many businesses facing the twin dilemma of remaining competitive by offering a free returns facility, while ensuring margins are not wiped out in the process.
Making the transition from a bricks to clicks has not been easy for many struggling high-street brands, often requiring firms to invest heavily in greater internet capabilities and stock inventory and delivery mechanisms necessary to achieve a multi-channel retail proposition. On top of this, there’s now the added pressure of contending with the extra stress placed on their supply chain due to an unprecedented increase in returns – putting a much greater onus on how the choice of packaging and packing procedures can help businesses deal with the fallout from returns.
‘Returns ready’ packaging
Luckily help is at hand, via a myriad of innovative packaging and logistical solutions designed to guarantee that not only can products be delivered from A to B on time and in perfect condition, but can also be returned easily without breaking the bank and being damaged through the rough and tumble of the logistics environment. Often this starts with ensuring companies are using the right choice of packaging for their product, whereby it should be easy for the customer to return and durable enough to withstand the multiple points of contact through the supply chain.
For instance, clothing regularly goes missing during the returns process, whilst electrical goods can end up damaged either because the customer cannot easily re-use the original packaging to return the items or the packaging has not been designed to survive the rigorous return journey back to the warehouse. In some cases, dependent on the nature of the product, it may be that a bespoke packaging solution is the best preventative measure for unsaleable stock.
A great example of this is when a leading British supermarket was faced with rising incidents of damage to TV’s returned to its stores. Early investigations revealed that the boxes being supplied for television returns were outdated and inadequate, and meant that whilst some TVs left the supermarket for the returns centre as a high value re-saleable item, they would often arrive as completely non-sellable due to four or five TVs being placed in one box which frequently smashed together and damaged the screens.
Working with the retailer, Antalis devised a bespoke corrugate solution that included four box sizes designed to snugly fit individual TVs, within which the internal protection solution was a polyethylene foam – a dense foam product which can be used to make bespoke shapes to create end caps, protecting the product from any drops or other impact. Following the roll-out of the new system, the supermarket was able to significantly reduce damage to TV returns, which ultimately saved the retailer hundreds of thousands of pounds a year.
Streamlining the returns process
Equally important for retailers looking to ramp up their returns process is taking a cold hard look at their existing operations and understanding the goods flow. This requires the business or any outsourced logistical partner to ask tough questions such as ‘how many touchpoints are there throughout the returns process?’ and ‘how many opportunities are there for goods to get damaged or go missing?’
A recent study by John Lewis Clear Returns estimates that returns sent during retail peaks such as Black Friday or Christmas can take as long as six weeks to process, by which time many will be regarded as out of season and sold at discount.
When you consider that the average returned purchase in the UK passes through seven pairs of hands before it is listed for resale, it’s easy to see why it can be a long and costly process. Often packages are initially returned to a local processing plan, where after being collated with other returns are then sent on to a centralised warehouse for cleaning and repackaging before finally making its way to a distribution centre, ready for the next customer. Understandably, then, the case for a more simplified and streamlined packaging process has never been greater. At the heart of this approach is reducing the overall touchpoints during the returns process which not only cuts costs and minimises the chances of goods going missing or being damaged in transit but also offers the retailer or supply chain partner greater visibility of returned stock.
For example, at Antalis we are advising more and more retailers that instead of sending goods, which have been returned to store, back to a central distribution warehouse for sorting, a more efficient and cost-effective solution is to provide packaging to staff so that such goods can be repacked in-store, ready to be sold to the next customer.
Finally, another crucial way to minimise touchpoints during the returns process is to consider how packaging can help with warehouse optimisation. With space increasingly at a premium in the logistics environment, using solutions such as recyclable palletised containers or mobile storage racks can go a long way not only in saving valuable warehousing space, but also in creating a slick returns process that reduces chances of lost revenue due to goods being damaged. In fact, the challenges around returns have become so great that Antalis Packaging recently unveiled a new team exclusively dedicated to helping its e-commerce and supply chain customers address such issues using the latest innovations in packaging, packaging design, automation and logistics & warehousing. As part of the ‘Challenge Antalis’ initiative, a member of the new e-commerce and logistics team will conduct a free Smart Audit of a business’s premises and packaging, and make recommendations for improvements – a service which has already resulted in some customers seeing their packaging costs slashing by a whopping 70%.
Simplicity in the chaos
Amid the growing complexity of the logistics supply chain, many e-commerce traders have traditionally overlooked the importance of putting in official processes for returned goods. For others, it may be an area that’s proving a minefield to navigate, in which case, packaging specialists like Antalis can help businesses ‘see the simplicity in the chaos’.
With retail giants such as Marks & Spencer planning a record number of store closures as they seek to move sales online, many consider this a bell weather moment for the industry where getting the returns process right will not only play a pivotal role in a retailer’s profitability, but ultimately, their survival.