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Returns management: The Achilles Heel of the UK logistics sector?

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  • May 11,2022
  • By Admin

The customer is king, as the old adage goes. This has never been more true than it is today: consumers have more choice of product and vendor than ever before, with businesses competing fiercely to keep prices low and convenience high to attract and retain customers.

On top of this, we have the inexorable rise of eCommerce. Online retail has had a steady adolescence, gaining market share incrementally as customers have been won round to the reliability and variety available online relative to the high street. The pandemic only served to accelerate this growth, with traditional retail centres shuttered across various periods due to national lockdowns, and profitability slowed by social distancing restrictions once they re-opened.

Accordingly, many became converts to online shopping. The days of consumers wanting to assess the quality of goods in person before purchasing are increasingly becoming a thing of the past, as the speed and dependability of online retailers increases. In large part, this can be accredited to improvements made in recent years to product returns.

If the consumer is king, then customer service is its courtier. In eCommerce, business leaders will find that the loyalty of customers is difficult to attract, and easy to squander. Given the low barriers to entry and minimal set-up costs relative to traditional retail, there will always be a competitor prepared to offer a lower price, or a greater variety of products – so the fine margins of competitive edge often come down to the quality of service on offer, and whether a customer has a positive experience from the first order.

As a result, companies are incentivised to be as generous as possible with their returns policy.

Standing out from the crowd

Naturally, this has created something of a ‘try before you buy’ consumer culture. (49%) of UK customers have returned goods in the last year, including 60% of the younger cohort (18-34) more likely to habitually turn to online shopping. This is a fact of life in online retail, and one which businesses largely account for – no sale is final, and no chicken can be counted before it hatches.

It does, however, create a headache for SMEs on the logistics side. Research this year found that small businesses were losing £15,000 a month to refunds, which can cost substantially more to bring back to the retailer than to deliver to a customer.

It also means businesses must be prepared to maintain first-class shipping infrastructure equipped to handle both outgoing and incoming goods, as well as ensuring their warehousing capacity is robust to handle peak season – after which, returns season naturally follows.

Take the example of the fashion industry. Clothing retailers have grown substantially in recent years, and flourished throughout the pandemic, but as early as 2016 it was reported that 25% of sales were returned. By the time a garment is delivered, rejected by the consumer, the return is requested, shipped, handled, processed, and relisted, the business is left with not only a lost sale, but an item which is likely to be out of season. This will then have to be sold at a discount – if it can be sold at all.

Finding the balance between preserving a businesses’ bottom line, and offering high quality service and convenience to consumers can be challenging – and highly costly – particularly for SMEs who lack the in-house experience and nous to find an appropriate and industry-sensitive returns policy.

Business leaders would, then, be well-advised to take in the wisdom of a logistics expert, who can find the right fit. At One World Express, for instance, we have integrated our Returns software into each regional hub, allowing businesses to oversee their returns in real time. This helps reduce the time a package takes to return to its origin from days or weeks to hours. This means faster refunds for consumers, and greater information for businesses to gather and determine their future strategy around, as well as a convenient access point to deliver efficiency and help keep control of returns.

Returns management can certainly be a difficult process to manage - particularly with consumer demand for online services growing at an exponential rate. However, provided they develop, implement and regularly evaluate a sensible returns policy, and seek expert advice from the likes of One World Express where necessary, organisations should be able to ensure their customers are adequately satisfied with the returns service they provide.

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