Forbes – $1.05 trillion of total U.S. retail sales were online, with approximately $218 billion attributed to returns

The E-Commerce Boom and the Returns Challenge

As online shopping gained mainstream popularity, the convenience for customers was evident, leading to substantial growth in the online channels of retailers. However, with this surge came a significant rise in return volumes. In 2021, the National Retail Federation (NRF) reported that $1.05 trillion of total U.S. retail sales were online, with approximately $218 billion attributed to returns.

The Costly Reality of Returns

Returns pose a complex challenge for retailers, involving decisions on whether to inspect and resell returned products or seek compensation from manufacturers for unsalvageable items. Research indicates that the top reasons for returns in 2021 were incorrect fit (70%), damaged or defective products (65%), description mismatches (49%), and product dislikes (32%).

The return process triggers a chain reaction involving warehouses, distribution centers, and logistics units, compounding challenges for retailers grappling with supply chain issues, high labor costs, and logistical complexities. Handling returns efficiently becomes a critical aspect of managing the entire supply chain.

Financial and Environmental Impacts

Returns are not only financially burdensome but also have environmental repercussions. Estimates suggest that the cost of returning a $50 product is approximately $33, encompassing processing, transportation, losses from liquidation, and product discounting expenses. In 2020, returns were responsible for 16 million metric tons of CO2 emissions and 5.8 billion pounds of landfill waste.

Consumer Influence on Returns Policies

Consumer behavior is notably influenced by return policies, with nearly four in ten respondents in a survey stating that these policies impact their purchase decisions. Retailers have responded by extending return periods, with the 30-day window becoming an industry standard and some, like Nike and Apple, extending it further.

Smarter Handling of Returns

Addressing the challenges of returns requires a smarter approach. Real-time analytics tools can provide retailers with insights into sales and return patterns, enabling them to identify issues promptly and take corrective actions. Machine Learning (ML) technology can aid in determining the most efficient solution for specific cases, such as calculating whether repairing a damaged product is economically viable.

Automation and Customer-Centric Strategies

Automation of the returns process, supported by predictive analytics and intelligent technologies, can streamline the routing of returned goods back into the resale channel, facilitating re-commerce. Meeting customer needs through planning and prediction tools can also contribute to reducing return volumes, as customers are less likely to return items that align closely with their expectations.

Transforming Challenges into Opportunities

Data, when leveraged in real-time, has transformative potential for retail. Predictive analytics and intelligent technologies can minimize waste, drive re-commerce, mitigate depreciation, and ultimately turn the cost of returns into an opportunity. Technologies like the SAP Intelligent Returns Management are designed to optimize retailer margins and enhance the customer experience in the face of the returns challenge.

In Conclusion: The surge in e-commerce has brought with it the challenge of managing returns efficiently. By leveraging advanced analytics, machine learning, and customer-centric strategies, retailers can transform this challenge into an opportunity, minimizing waste, optimizing processes, and ultimately enhancing both environmental sustainability and profitability.

Read the full article: SAP BrandVoice: Space Technology Is Driving Autonomous Cars. Here’s How It Works (forbes.com)