Apparel April 2019 Apparel May 2019 issue | Page 70

INDUSTRY INSIGHTS
MANY IN THE INDUSTRY
BELIEVE THAT MOVING AWAY
FROM FREE RETURNS IS A
SIGN THAT THE MARKET IS
MATURING AND CUSTOMERS
NEED TO BE INCENTIVISED TO
SHOP MORE SENSIBLY.
However, KPMG research shows that the cost
of handling return items, even in stores, can
be almost as much as three times the cost of
initial delivery. This is once again the result of
the complex inventory management systems in
place along with the additional issues of security,
damage protection, and quality inspection.
For large online retailers, the main method to
reduce expense in this department is to deploy
a dedicated returns distribution centre which is
supported by third-party logistics companies.
These centres manage the processing of returned
items and determine if they can be resold or
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I APPAREL I
May 2019
repaired or repackaged for discounted sales
or need to be discarded. This overall returns
process incurs additional costs due to aspects
like customer service calls, packaging, sorting,
refurbishing, transport, handling, restocking, and
transaction costs. As we know, the average rate
of online returns is 20 per cent and this is well
factored into costing calculations. However, as
the rate of returns increases, these administrative
costs accumulate precipitously and can wipe out
profits from the books completely.
THE CUSTOMER PERSPECTIVE
There is little doubt as to what is motivating
e-commerce players as they begin to phase
out the free returns policy. Many in the industry
believe that moving away from free returns is a
sign that the market is maturing and customers
need to be incentivised to shop more sensibly.
This means that shoppers need to make
more exact purchases instead of shopping
speculatively with the idea of free returns leading
them to place excessive orders. However, this
may actually be a misguided strategy. After all,
other major e-tailing giants like Amazon, Flipkart,
etc. have yet to adopt this measure.
The reason is very simple. Online shopping is
still a highly removed experience which breaks
from our traditional roots of touching, seeing
and trying out our purchases. From clothes to
electronics, consumers want a tactile experience
driving their purchases. But the benefits and
convenience of digital cannot be ignored and
having the safety net of free returns allows
consumers to take the leap of faith and indulge in
digital shopping.
In fact, research from Narvar shows that
95 per cent of online shoppers favour online
retailers who offer a positive customer
experience, with 82 per cent of them highlighting
the importance of convenient returns. In fact,
49 per cent of shoppers make their initial buying