With the growth of e-commerce returns have become a huge problem for retailers of all sizes. A good return policy is key and more people are checking policies before they purchase an item. We spoke with Al Gerrie, Founder and CEO of ZigZag Global, at Deliver, one of Europe’s largest e-commerce events, on returns and consumers’ behaviour. More stories from Deliver at the end of the interview.
What are the biggest challenges retailers face when working on returns?
There are several challenges that retailers face right now. Costs are increasing and fuel prices are going through the roof. There is also a hidden cost to customer service and also the cost of moving stock. Labour costs are also going up for the people who are processing the returns. In addition, there is a huge number of consumers who expect free returns. The last is sometimes just an unrealistic expectation.
Consumers’ expectations are changing, however, and they are checking returns’ policies more and more before they decide to order. 79% of consumers are now checking the policy and half of them will compare prices.
The challenge for the retailer is to get the return proposition right so the consumer feels that they had a positive experience and will shop from the same store again. Logistically that could be a challenge, especially if you throw into the mix Brexit where we have some unique transport problems.
Furthermore, it is very important to know what is being returned. This is one of the things ZigZag does so consumers can say what they are returning, why, what would they like instead, etc. Then consumers can choose between a few different carrier services like pick-up from home, drop-off at shops, lockers, post office or returns to stores.
Is giving as many options as possible what makes a return policy successful?
Yes, convenience is very important to consumers. People want to choose how to return the item and are looking into different options: stores that are open 24/7, for example, because they are busy during working hours, etc.
Flexibility around free and paid options is also important. Not all consumers insist on a free return and are happy to pay but need the item to be picked up. The old days of putting a return slip in the box are running out and that is because retailers need to know what is coming back and the condition of the return.
How can retailers control how likely an item is to be returned?
ZigZag can do that with data analytics to predict if a consumer is likely to return an item. For example, 41% of consumers choose to buy multiple sizes and colours. So we know there is going to be a return and that people are buying with the intention to return. We can flag those orders to retailers and monitor that consumer’s behaviour over time. We can pick out those that are just buying to take a photo for social media, for example, and then return the item. In this way, we know not to send them promotions and encourage them to buy more as we are aware they would just return it.
What is more important for retailers is to keep the products in the local market to reduce costs. This can be done by having local carriers, who can post returns to a local warehouse and not cross-border.
How has this been affected by Brexit?
Yes, it has been a really challenging time for both retailers and carriers. But software solutions can manage costs and the challenges. Knowing what is in the box also means that we can amend the customs’ declaration when an item is being returned. Really good data is key.
Having the full information helps in these situations as we know who the customer was, where were the goods delivered to in the first place, how they arrived there, etc. When it comes to returning, we already know everything that we need. We do not ask consumers to fill in customs declaration as they will get it wrong 100% of the time.
What is the connection between returns and the Circular Economy?
There is a big connection and a big part of what we do. We have cut out the label on the box completely. We also enable retailers to get rid of dispatch notes in their orders. They can communicate the information digitally and nearly 70% of all returns are paperless. Consumers do not have to print out anything and this often helps the process as their home printers are not as good. A QR code is issued and this is all consumers need.
In our locations in the UK we have the facilities to evaluate the quality of the item and decide what to do with it. This can mean it will be resold, donated, or consolidated and brought back to the retailer. That cuts the carbon footprint and the airmiles the product would need to travel.
Are goods in generally good condition when they come back?
Most of them are. There might be an issue with packaging but generally 80-90% of the goods can be salvaged for a high value resale. There is still a cost associated with that but most of it is in good condition. Consumers are becoming a bit more conscious about returns and the sustainable aspect of how they behave. They are being a bit more careful.
Are we at the end of free returns?
There is no such thing as a free return and there is always somebody who is paying for that. Large retailers are starting to change their policy and they are charging for returns in some countries. This would depend on how large the market is and also how important a specific consumer is for the brand. At the same time, although they are at a cost for the consumers, retailers are still subsidising the whole process. I think retailers would be able to get away with charging upto £5 per return but maybe not much more, even though costs may be higher.
Would this not incentify consumers to just throw the item away?
Potentially, but retailers are trying not to tell consumers to just keep the items. That could encourage bad behaviour and would create real returns problem. I think it is still important to bring the goods back and find a different user or recycle the goods, rather than encouraging landfill.