In recent years, sustainability has become a critical, pressing demand for retailers, as eco-conscious shoppers expect brands to practice environmental friendliness at every stage of a product’s journey.
From the energy consumed in stores and warehouses to the waste generated by packaging and unsold products, every aspect of the retail supply chain is linked to environmental responsibility, putting entire operations under the customer’s microscope. Ignoring sustainability harms the environment and can damage a retailer’s brand image, ultimately pushing customers away, which is bad news for any business.
However, there’s a contradiction at the heart of this trend: consumer demand for frictionless returns.
The ability to easily send back unwanted items is a significant factor in positive customer experience (CX), especially in e-commerce. But the environmental cost of returns, from the additional transportation to the waste generated by unsellable returned items, is substantial.
So how can retailers meet customer expectations for no-hassle returns while minimizing their impact on the environment?
In our next article in the Reshaping Retail CX series, we delve deeper into retailers’ pain points in implementing sustainable returns practices, explore success stories in the market, and discuss potential solutions to this complex issue.
Sustainable Returns: A Challenging Dilemma
Let’s be frank: the initial costs associated with optimizing return processes for sustainability might seem intimidating, yet they represent a calculated investment in long-term financial health and environmental well-being.
For example, transitioning to biodegradable or reusable packaging may come with a premium price tag, at least initially. Likewise, localized return centers might be intended to minimize carbon emissions related to shipping but can require significant capital for infrastructure, staffing, and logistics. Furthermore, retailers might need to invest in advanced technology solutions to ensure efficient management of these centers and to remove any unforeseen friction in the returns process.
Beyond the financial hurdles, operational difficulties loom large. At the heart of this is the complexity of managing reverse logistics, a process that involves tracking returned merchandise from the point of consumer contact to the point of resale. Layering on a commitment to sustainability, which may entail additional steps such as responsible disposal or recycling of packaging materials, turns this process into a logistical nightmare.
Also, ensuring that returned items are resold, rather than ending up in a landfill, requires an effective system for assessing, refurbishing, and reintroducing products to the sales cycle while maintaining quality control. These operational complexities can demand significant time, expertise, and resources.
Then there’s employee training and possibly department restructuring, both of which can be disruptive and labor-intensive in the short term. This internal reshuffling extends to the need for a new collaboration with manufacturers, logistics providers, and other stakeholders to implement sustainable return practices.
And, of course, customers value convenience, which often comes in the form of pre-printed return labels, expansive return windows, and free return shipping practices that can undermine sustainability efforts.
Still, as daunting as these obstacles may seem, they are not insurmountable, and the long-term benefits significantly outweigh the initial hurdles.
What Happens When Returns Are Done Right?
A key advantage of sustainable returns is increased customer loyalty. With green consumerism on the rise, shoppers are likelier to buy from retailers prioritizing sustainability. Improved return processes also lead to smoother CX, fostering stronger customer relationships, driving repeat purchases and reducing acquisition costs.
Moreover, sustainable returns practices can help decrease waste, leading to cost savings: reusable packaging materials, for instance, reduce the expense of purchasing them over and over.
Improved operational efficiency is another significant gain, as sustainable practices often lead to more streamlined, leaner operations that can reduce costs in the long term. For example, establishing local return centers can decrease transportation expenses and carbon footprint while speeding up the return process.
But most importantly, the positive impact on the brand image can be substantial, as demonstrating a commitment to sustainability can differentiate a business in a crowded marketplace, potentially attracting new customers and retaining existing ones.
Market Success Stories
Household-name retailers have pioneered initiatives encouraging customers to return items for resale or recycling. As part of the “circular economy”, many involve offering customers incentives to return items in-store, reducing waste and contributing to a more sustainable business model.
At H&M, for example, customers can return any clothing items, not necessarily from the same brand, and receive a voucher for future purchases. Likewise, IKEA has started accepting used furniture, which it resells at a discounted price.
The rise of recommerce, or the selling of refurbished goods, is another trend reshaping retail. Companies like Back Market offer refurbished electronics, providing consumers a more affordable and environmentally friendly alternative to buying new. This trend is not limited to electronics; fashion is a significant part of the recommerce industry. Platforms like Vinted and Depop have revolutionized how we buy and sell secondhand clothes, making them more accessible and less stigmatized.
The concept of “returnless refunds” is also gaining traction. This approach allows customers to receive a refund without needing to physically return the item, reducing the environmental impact of shipping and handling. Retailers find this method beneficial as issuing a refund often costs less than processing a return. Moreover, it enhances customer satisfaction and loyalty, as customers appreciate the hassle-free experience.
On the flip side, there is a risk of these strategies going wrong. Some retailers have started penalizing customers who return too many items to discourage excessive returns. While this approach might help reduce waste, it could alienate customers who value easy returns. Comparatively, Amazon’s policy of sending individual items in separate packages is convenient for customers but is not environmentally friendly. This practice, while customer-centric, contributes to increased packaging waste and carbon emissions due to multiple delivery trips.
Potential Solutions
So, how can retailers avoid the pitfalls of sustainable returns while maintaining customer satisfaction?
One potential strategy could be to limit free returns—either by quantity, frequency, or value—making customers more deliberate about their purchases and reducing unnecessary transportation and packaging waste. While free returns are a staple in modern retail to boost customer satisfaction, unlimited free returns can stimulate overbuying and excessive returns, generating substantial environmental impact. An annual limit is a good place to start.
Incentivizing customers to keep products can also play a significant role. Offering discounts on future purchases or loyalty program points to customers who choose to keep or exchange products instead of returning them can reduce the volume of returns and the associated environmental footprint.
Moreover, educating customers and colleagues about the environmental impact of returns is crucial. Clear, concise messaging about the ecological consequences of returns on product pages and in communications, coupled with training for customer service advisors, can help guide consumers toward more sustainable shopping habits. Brands can also educate customers about correctly using and maintaining products to further reduce the likelihood of returns.
Tailoring these strategies to your brand’s specific circumstances, target audience, and product offering is essential. For instance, a high-end electronics retailer may find more success in offering full warranties and repair services to minimize returns, while a fast-fashion retailer may focus on educating consumers about the environmental impact of overbuying clothes and returning them.
On the tech side, retailers can leverage data analytics to predict return rates, understand customer behavior, and optimize the return process. For example, sophisticated predictive analytics tools can enable retailers to analyze historical purchase and return data, identifying patterns and trends. These insights can help businesses anticipate return volumes, allowing for better planning and resource allocation, thereby reducing waste and inefficiency.
Furthermore, data analytics and business intelligence can provide deeper insights into why customers return products. By automatically analyzing customer feedback and return reasons, these technologies can pinpoint common issues—like product quality, sizing inaccuracies, or misleading product descriptions—and allow businesses to proactively address these problems, reducing the volume of future returns.
Blockchain technology, with its capacity for creating transparent and immutable records, can facilitate a more efficient and sustainable return process by tracking products through every stage of their lifecycle—from production to purchase, return, and, potentially, resale. This kind of visibility can aid in managing the logistics of returns, ensuring products are handled responsibly and sustainably, and even providing customers with verification of a product’s sustainability credentials.
While each of these strategies offers its own potential benefits, they are most effective when used in concert, providing a comprehensive, balanced approach to creating a sustainable and frictionless return experience.
Look out for next week’s article in our Reshaping Retail series where we will examine how blending the best of physical and digital retail to create a seamless customer journey is the next big challenge (and opportunity) for retailers.
