There is no denying that January is the season for e-commerce returns and whilst this can be a huge pain point now, the problem can be year-round for many online retailers and in some cases return rates can be up to triple that of bricks and mortar.
Nobody wants an unhappy customer and returns can be an issue for any retailer, however they can also have a significant effect on the overall success of your business. Just how far do these effects reach beyond a customer complaint? In this article, we explore the different types of returns, why they can be such a problem for e-commerce retailers and what you can do to tackle them.
Before you look at solving this headache, it is important to understand the different types and reasoning behind your customer returns:
Accidental – Occurs through damage in the supply chain, where it could be the result of rough or excessive handling
Intentional – When the customer orders multiple colours or sizes of the same product, with the intention of returning some items before items are dispatched
Superfluous – Caused by a late delivery, or the wrong item being dispatched, leaving the product undamaged but no longer required by the customer
Preventable – Untrained packers, low quality materials and unsuitable designs can all contribute to this type of return, resulting in the product being damaged prior to delivery
So how can you provide customer friendly returnable packaging?
It starts by having a clear understanding of the supply chain touch points that impact the successful delivery of your products. This is followed by analysing your returns data, so that you can design packaging adapted to your greatest quantity, or highest value return type. This gives you the ability to find the sweet spot between the hidden costs of returns and investment required in your packaging solution.
The 5 key areas affected by returns:
Shipping – When the product is delivered damaged, you will not only have to pay for the cost of the return, but there could be additional costs for sending out a replacement.
Using testing protocols for your packaging like DISCS can ensure suitability for your supply chain and reduce the likelihood of damages. In addition, this can support claims filed with couriers, as it can be used as proof of performance, highlighting rough or excessive handling.
Labour – Restocking is not the only labour cost, there is also unloading, opening and unpacking of the returned packs. There could also be time spent filing a courier claim and once the product has been returned, it could require to be sold, recycled or repaired, all of which is a drain on time and resources.
Making your packaging return friendly with opening features and enabling the customer to use the original packaging can help your staff members reduce restocking time. It is important that they can open and remove the product without causing damage or using tools, as in some cases I have seen items returned in a refuse bag wrapped in parcel tape.
Financial – Refunds or compensation for damaged products, along with an area for processing and storing returns all cost financially, eroding at your profits and margins.
In this situation, prevention can help to reduce the space required for processing returns, along with refunds or compensation, again, testing your packaging for supply suitability and training your staff in best practice is critical.
Brand – Receiving a damaged item is incredibly frustrating, your order triggers a dopamine stimulation, then there is the feeling of disappointment when the product arrives broken. It is important to think about “soft costs” in this situation, how much can a negative review, or dissatisfied customer posting images on social media really cost you.
Your packaging is the first point of contact, so a good solution and experience not only shows you care, but that you also value their order. In some cases, this can have the opposite effect and see your customer posting about their great unboxing experience on social media.
Sustainability – Returns shipments not only use additional fuel and emit more CO2, but they also result in extra materials being used and the generation of further waste. Damages and claims are not always tracked under sustainability targets, but they can certainly have a great impact on them.
Testing for supply chain suitability and training your packers can reduce damages greatly, whilst using optimisation software like DS Smith’s eBRO (eBox Range Optimiser) can reduce the shipping of excess air and support a more sustainable return if required.
How much can damage or a return cost?
Speaking from a recent personal experience, my wife received a delivery of two small glass cosmetic bottles, one of which was leaking upon arrival. They were wrapped in paper and filled no more than 10% of the overall case volumetric. The material was of a high performance and showed no signs of damage upon arrival. However, poor packing in the fulfilment centre allowed the product to move around inside and combined with a box that was too large, resulted in the failure of the product. The pack design had no printed instructions of how to open, even though it featured a zipper rule opening. This resulted in the pack being ripped open and then difficult to be returned. The packaging should have worked, but poor packing in fulfilment resulted in contacting customer services and the need for a replacement to be shipped. This damage was caused by the packer not using enough void fill, combined with a poor choice of packing boxes, all of which could have been prevented. Cost for this damage and return? The order was £47.00, which could provide a profit of £9.40 at 20% margin, once the replacement had been sent and affected items returned, the incident created a loss of over £28.20. This means that one damaged delivery requires three further orders of the same value to break even.
These costs and the depth of business that can be affected, highlight the importance of understanding and reducing returns. If they are a pain point for you, speak to one of our e-commerce experts and see how we can support you with a cost-efficient and sustainable packaging solution.
