Rethinking the returns headache: How retailers can make it work for their customers

After a turbulent 2022, many retailers will be anxious about what 2023 will have in store. However, despite low expectations, Christmas trading updates from retailers in January were relatively upbeat, once again showing the significance of the festive period for Brits.

As we are now emerging from the post-Christmas ‘returns season’, the economic situation remains front of mind, and brands will be doing all they can to manage their outgoings and protect their margins for the months ahead.

A huge factor in protecting profitability is the cost and volume of returns. Accenture research just before Christmas found that over a third (35%) of retail executives reported that their company is experiencing a higher rate of returns compared to six months prior, eating into time and profits.

Though consumers have grown accustomed to free returns as standard, it’s no surprise that some retailers are pushing back and reintroducing returns charges. Over the past year, some major high street brands have started charging online return fees for shoppers around the £2-£3 mark.

All signs point to a wider shift within the industry to recoup the soaring fulfilment costs involved with online returns. Delivery disruption also created logistical problems over Christmas, as returns due to late deliveries and delayed returns themselves had an even greater impact on retailers’ bottom line.

With shoppers expecting to be able to return items with minimal friction, how can retailers tackle rising return rates without losing sales? There are solutions to keep the returns process as frictionless as possible.

Using technology to minimise returns

Whilst some levels of returns are an inevitability, particularly for online retailers, there are technological solutions that can help to bring down the number of items shoppers end up returning.

For example, using AI-powered sizing tools can reduce the impact of clothing returns on businesses' bottom line. Several brands and retailers are integrating these sorts of tools, both to create greater sizing accuracy during design and to help customers select the right size at the point of purchase.

Online retailer The Very Group partnered with US provider True Fit, which leverages AI-powered machine learning to provide tailored size advice to shoppers. True Fit claims its tech reduces retailers’ average returns by 5%, and cuts size bracketing-related returns by 40%.

True Fit is powering The Very Group's tailored online size advice

It’s here that technology will be crucial to helping retailers find a careful balance between product, price, and experience, which will encourage customers to shop with them again in the future and be more likely to keep their purchases.

Augmented reality is another area retailers are experimenting with, where customers can enter a virtual fitting room powered by AI and RFID, so they can try on items from afar.

Further down the line, virtual reality, specifically the metaverse, could also have a part to play in the returns process. For example, consumers could end up creating avatars that have their exact sizing and dimensions, before entering a retailer’s ‘virtual fitting room’ to try on different items to see how they look on their bodies. If a customer is able to try before they buy, albeit in a virtual setting, this minimises the need for ordering multiple sizes or styles in one go and cuts down the need for returns.

Don’t be afraid to encourage alternative means of returns

Forward-thinking retailers are exploring alternative means of returning items to the typical postal option, which often proves to be more cost effective and speedier. Solutions such as going in-store or using locker drop-off points allow for a smoother returns process for both the customer and the retailer, particularly in urban areas with greater access to shops.

In July 2021, for example, Marks & Spencer rolled out a new click-and-collect service that lets customers make returns, as well as pick up orders at over 70 of its stores via self-service digital screens and drop-off bins. It also updated its mobile app for users to choose how they want to return purchases, using product barcodes to navigate the process. As of March 2022, the new service had collected about 70,000 returns.

Marks & Spencer's new self-service Click & Collect and returns points

This approach allows retailers to refund their customers more quickly whilst also making suitable items available for re-sale faster than ever before. Not to mention the supply chain benefits of reducing the time and logistical costs required to process returns during an intense period for the sector.

Promoting sustainability on both sides

One benefit of charging for returns is that it makes people think twice about whether to order multiple styles or sizes or buying items that they don’t need. So, beyond the cost benefit, it also promotes more sustainable shopping habits. Retailers have an opportunity to educate their customers on how to shop in a more environmentally friendly way and make best use of their returns policy.

To make this process as smooth as possible, buy-in is required from both sides. Reducing returns doesn’t just encourage customers to make more sustainable choices, but helps retailers to remove unnecessary processes from their operations and use less resources – such as energy, water and transport - to process the returns. Commitment from both sides will make a huge difference to the planet.

It’s no secret that sustainability and technology go hand in hand, with areas such as data analytics providing greater transparency and allowing retailers to understand their carbon emissions or water wastage across their products. Though this can go even further to help mitigate excessive returns, such as providing brands with data on the past performance of a garment, insight into what styles were more likely to be returned in the past due to a quality or fit issue, or whether items from specific factories had a higher rate of returns. Technology enables retailers to have granular information at their fingertips, meaning they can make better informed decisions based on the success rate of a garment or line, and ultimately have a more satisfied customer base.

Retailers will continue to tackle the returns headache this year, but ultimately, it’s about reframing how consumers and retailers approach returns to save money and time for both parties, whilst helping the planet. This will enable retailers to successfully navigate return rates with their customers, without losing sales.

Lynda Petherick

About the author: Lynda Petherick, head of retail for Accenture in the UK and Ireland. She leads Accenture’s retail and travel business across the UK and Ireland. In addition, she leads Accenture’s sustainability innovation work across the UK and Ireland, as well as sustainability programmes in the retail sector across Europe. She has worked extensively with executives across the fashion and wider retail sector over the past 8 years. Passionate about sustainability, Lynda believes that bold, transformative change is required across the entire retail supply chain and broader business ecosystem. Lynda has recently joined the Board of the British Fashion Council as a Non-Executive Director. In this role, she combines her ability to mobilise and lead industry transformation with her track record of advising the fashion sector on sustainability initiatives.

TheIndustry.fashion recently teamed up with leading logistics provider Bleckmann to produce and in-depth report entitled Gain A Return on Returns: Reduce, reuse, resell - how retailers can transform returns from a profit drain to a profit driver Download your free copy here.