The Real cost of E-Commerce Returns

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The Real cost of E-Commerce Returns

E-commerce has grown rapidly over the past two decades. It becomes an inseparable part of today's era. Today, 27% of apparel sales are made online. There’s no doubt that buying clothes online is more convenient than in-store, where you need to try on the garments in a public changing room. Instead, we’ve gotten used to browsing from the comfort of our sofa and trying on outfits in our bedrooms. But part of the reason buying clothes online has been so popular is that many brands make E-commerce returns hassle-free with no cost. According to data from Boston Consulting Group in their “2019 U.S. and Specialty Retail Outlook”---

  • Almost 40% of surveyed expressed that allowing easy returns is the most important consumer need.”
  • In the U.S. alone, consumers returned $3.5 billion of all online and offline purchases last year. Online purchase return rates also tend to increase considerably during holiday periods.
  • Almost 80% of people in the US and UK check returns policies before placing an order. 
  • E-commerce return rates have spiked 95% in the last five years. The “new normal” has set off an expensive and vicious cycle that even Amazon can’t endure. In fact, alongside companies like Nordstrom and LL Bean, recently even the e-commerce giant has tightened up its policies.
  • About 10% of goods sold in the United States go back to retailers every year, resulting in about $369 billion in lost sales, according to a 2018 report from Appriss Retail and National Retail Federation.

The journey of e-commerce purchases and returns

E-commerce purchase is like one click away from customers. For everything, people used to search and try to buy online. Even in coronavirus pandemic, this habit becomes necessary, online giants like Amazon, Walmart, etc. have had a huge hike in their sales. But when it comes to sustainability, customers only relate this to the quality of the product, if it is organic or eco-friendly. They forgot about the carbon footprint generated by e-commerce deliveries and returns. A consumer only pays for their product and thinks of free returns as a blessing, but there is another bill that is to be paid by the environment. 

Generally, what happens, you put products in the online cart, like three sizes of the same t-shirt, and think of returning two which doesn’t fit at the time of buying itself. After getting your full order, you return two of them. In this way, carbon footprint becomes doubled in shipping the same products two times. When you start your free return from your houses, the environment  impacted as follows:

Logistics

logistic impact
Source: Amazon prime

As a consumer, you don’t pay attention to the delivery trucks running on the roads across the big cities. Courier services use massive polluting vans for the collection of returns. One time return of a single product in a van emits 181g of CO2. Think for one second, what should be the amount if you return products in large numbers. You can not imagine, approximately 17 billion items are being returned every year that accounts for 4.7 million metric tons of CO2 in the environment.

Intentional returns

In addition to the emission due to logistics, if you buy three shirts, two of which you never intended to keep, this creates an inflated production of shirts where the manufacturer needs to produce a lot more shirts than demanded. And for every extra product produced, more carbon dioxide will be produced at the manufacturing process unnecessarily.

Post-production(the real garbage side)

This phase starts after the returned product reaches the inventory or warehouse. In reality, returning clothes rarely get re-sold. Instead, they are accountable for large carbon footprints and wind their way through a network of middlemen and resellers and, at each step, a share of those goods pile up in landfills.

It’s estimated that just 50% of returns go back into store inventory. Because of their condition, due to use, damage, or even just-opened boxes. Rest have a more bad condition. Stores may be able to return some to their manufacturer or resell them through their outlets. But often they sell them at a fraction of their original cost. 

The impact of E-commerce returns on small businesses

Returns impact small businesses in a very negative way, know-how.

Small businesses can’t bear the returns with their low margins 

Small sustainable businesses don’t keep a very high margin as they pay their employees fairly and also pay a high price for good quality fabrics. Their cost already goes high and to compete with fast fashion, they keep low margins and ultimately lose money if it is returned. 

Demotivating for everyone involved

Small businesses put their heart and soul into producing that one piece of garment, unlike fast fashion mass production. So when they make a sale, all the people who are involved in the process get excited but it really breaks their heart if the very same garment is returned without any particular reason. It is highly demotivating for them.

Can’t burn or throw their products

It is very easy for big brands or eCommerce giants to just throw or burn their products instead of finding the defect, correct it, and repackaging. For them, this cost is way higher than the cost of their product. On the other hand, small brands or sustainable businesses, they can’t afford to throw or burn, instead, they have to manually go throw the entire product to check for the fault. Amend, clean, and repackage it. This additional cost again adds up a lot and ultimately turns it into a loss.

Environmental impact of E-commerce returns

E-commerce returns have a massive impact on the environment in various ways rather it be transportation or dumping clothes in landfills.  A lot of big brands are showing concern about sustainable fashion being part of the highest carbon footprint industry. 

Fashion Revolution made a video that shows women trying on clothes on highways, surrounded by trucks and traffic. It’s a way of illustrating that while the act of trying on clothes at home seems fun, convenient, and glamorous, the real cost exists on the highways of the world, where trucks shuttle the goods to and from your house, polluting the atmosphere and contributing to global warming.

https://vimeo.com/306634065

Here are the some ways that impact the environment badly:

Transportation: 

In 2016, transportation overtook power plants as the top producer of carbon dioxide emissions for the first time since 1979. A quarter of this footprint comes from medium- and heavy-duty trucks doing last-mile deliveries after goods have been transported by plane or ship to a warehouse. Due to the demand for speedy and instant deliveries, trucks are often less full than they were before, which ultimately increases the carbon footprint.

Degraded resale value: 

Another cost of returning goods is that many brands have policies, not to resale the returned products. Sometimes the items don’t come back in perfect condition. Damaged or a part may be missing. Or it may just take too long to process the return that other consumers may no longer be interested in buying the item.

Packaging:

The environmental impact does not restrict to transportation and degraded resale values. Packaging also contributes a lot to increasing carbon footprint. Did you ever think about the plastic that came in the delivery box, cardboards, labels with adhesives? Packaging sometimes does not according to the size of the product. The packaging used is way bigger than the products. This generates tons and tons of waste that, unfortunately, not everyone recycles.

Overproduction

Overbuying of unwanted clothes leads to overproduction. Customers buy two or three sizes of the same clothing and return the unwanted, it made the manufacturer produce more than wanted. Returned products go into landfills or their value decreases. This impacted the environment so badly.

What would make consumers return fewer products online?

Many ways could help customers reduce the number of e-commerce returns they generally make

  • Companies should provide detailed/accurate size charts on their website so that consumer could understand the exact size and order responsibly without any doubt
  • Display photos of the products should be clear and feel real. To help customers, AR technology came to the rescue. This technology allows you to see the product in 3-D at your place. But it restricted to decor, appliances, rugs, and furniture, etc.
  • The description of the product should be detailed and accurate. There should be proper details of material, care specification, sizing, washing instructions, etc.
  • Consumers should know their sizes before ordering. You can check your size in store before ordering
  • Do not order your products in different slots, try to batch them together so that they come together in a single-vehicle at one time(if possible). This will decrease the carbon footprint by packaging them in one big box and one labeling.
  • Always try to buy fewer clothes, rather go for second-hand clothing or vintage. It is the best way for a sustainable lifestyle too.
  • Traceability and transparency into the supply made it clear how clothes manufactured, transported, and returned. As a result, customers also take it seriously and think before returning products. Blockchain technology could be used to make it clear for everyone.
  • E-commerce website vendors should educate their customers about the actual cost of free returns that their choices have an impact on the climate. Besides, online shops should listen and solve customers’' concerns and help them get the right product from the beginning. 

In conclusion, I want to say that despite everything you don't need to abandon your love for clothes and fashion. Altogether, there are a lot of ways to shop consciously and responsibly. It’s just a matter to know #who made your clothes and from where they are coming. It might be time to embrace vintage stores, or simply cut down on the clothes you buy each month. It's a good time to think about your environment and save on your wallet too.

References:-

  1. Khusainova, Gulnaz. “There Is No Such Thing As A Free Return.” Forbes, Forbes Magazine, 30 Mar. 2019, URL
  2. Segran, Elizabeth. “Your Online Shopping Has a Startling Hidden Cost.” Fast Company, Fast Company, 5 Feb. 2019, URL 
  3. Gilsenan, Katie. “Online Shopping Returns: Everything Retailers Need to Know.” GWI, 10 Dec. 2019, URL
  4. Chiara Spagnoli GabardiSenior Features Writer at Eluxe MagazineBased in Italy. “The True Cost Of Free Returns May Shock You.” Eluxe Magazine, 14 Mar. 2020, URL 
  5. Frost, Rosie. “Is Our Obsession with Online Returns Damaging the Environment?” Living, 9 Apr. 2020, URL 

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