Shifting the approach towards returns

In 2010, the e-commerce industry in the UK was worth £60bn. Fast forward to 2019 and its value has more than tripled to £182bn, according to the Ecommerce Foundation. Due to its convenience and 24/7 access, online shopping is becoming more popular than ever and by 2021 e-commerce sales are expected to reach 17.5% of retail sales worldwide.

With this in mind, it is easy to see why many retailers are ditching brick-and-mortar channels and incorporating online-only business models.The consumer culture of purchasing anytime and anywhere has had a massive impact on retailers, and a growing number of businesses are choosing an online-only method for their commerce.

This trend that has been apparent in the beauty and fashion industry in recent years is now creeping into other industries. For example, electrical and white goods retailer AO recently announced that it is launching a no-store mobile business model in the UK, to offer shoppers better value when choosing their next mobile phone and mobile network plan.
So why are retailers going down the route of no stores?

The 24/7 consumer culture has undoubtedly contributed to retailers looking solely at e-commerce options. Despite physical stores extending opening hours beyond the normal 9am-6pm in some places, the majority of stores have limited trading hours, which subsequently hinders potential economic profitability.

This, combined with the fact that retailers have access to a much wider market of buyers online and the reduction of financial overheads, are key attractions for retailers to opt for an online-only venture. With the ever-increasing popularity of online shopping, retailers of all sizes and industries are looking at new technology and solutions to attract customers and in turn boost their profit margins.

One of the key ways they are doing this is through the use of social media.
In recent years, social commerce has become a lucrative way for retailers to access customers in ways that are easily integrated into social media platforms.

Social commerce has grown quickly, with platforms such as Facebook’s Marketplace growing from 550 million users in August 2017 to 800 million in May 2018. Instagram has also seen the benefits with the launch of a sales tool to allow a seamless shopping experience that enables customers to purchase items without having to leave the app.

It’s clear these applications and no-store solutions are driving forward e-commerce and pushing consumers to buy online rather than in-store; it will also drive a significant spike in returns that retailers need to think about.

Taking the physical aspect out of shopping, consumers are unable to touch, see, try on or experience the item prior to purchasing it; this will encourage a trend of consumers buying products in a range of options to 1) ensure that they get the one that is right for them and 2) sending back any that aren’t quite right. Consider this: upwards of 30% of online purchases are returned and close to 20% of consumers purchase items across different sizes, colours or styles with the intention of sending back the majority of the order.

The ease of buying online may also see more impulse buying, which can lead to buyer’s remorse and, in turn, costly returns. When you consider the fact that the value of returns cost UK retailers £60bn a year, companies should have a plan in place for returns coming back, especially the merchandise that can’t go back on primary shelves and is scheduled for liquidation into the secondary market.

With returns having such an impact on the bottom line, many retailers are opting to leverage their own B2B marketplaces in order to auction bulk quantities of returned and excess merchandise directly to business buyers around the country.

A robust buyer base exists for returned and excess inventory regardless of product category or condition. For the retailer, using an online auction channel sets up a dynamic where many buyers are competing for the inventory; this pushes prices up, allows for faster sales cycles and reduces the cost of processing returns.

As consumers increasingly shift from purchasing in-store to online, volumes of returns are expected to reach new record numbers with no sign of slowing down. With retailers already battling to manage masses of returns, it is critical for retailers to shift gears in how they think about and approach returns. A process which can help offset the losses such as a B2B marketplace is increasingly being adopted by retailers in order to meet online customer service expectations and protect the bottom line too.

Ben Whitaker, B-Stock’s EMEA director