Analysis

The returns timebomb: interview with Jo Swinson, Consumer Rights Act co-author

Last week saw the introduction of the Consumer Rights Act on 1 October, which has a number of implications that impact particularly on the e-commerce logistics business.

Perhaps the most obvious is its potential to put more pressure on returns networks.

eDelivery spoke to one of the Acts authors, Jo Swinson, former Under Secretary of State for Employment relations, consumer and postal affairs, now a non-exec director at returns intelligence company, Clear Returns. We talked about some of the Act’s objectives, consequences and benefits.

I started by asking whether the Consumer Rights Act adequately balances the needs of both retailer and consumer, or whether it merely tilts things too far in shoppers’ favour.

Jo Swinson_Non-Exec Board Director, Clear Returns

Jo Swinson

“We wanted to make rights simpler and to reduce uncertainty,” Swinson tells me. “And we worked very closely with businesses as the Bill was being developed, prior to it becoming an Act.”

In Parliament, new laws start out as Bills, which can be put forward in either the House of Commons or the House of Lords. Their progression is broadly similar – the first reading states the name and intention of the bill, the second reading is an opportunity for it to be debated, it is then discussed and dissected by a committee. After that it is produced as a report, containing proposed amendments and given a third reading. Once it has made its way through both chambers (Commons and Lords) it is given Royal Assent and passed into law as an Act.

uk law

Confident consumers

As shoppers we all want to benefit from the protection of the law, but too much interference can, surely, get in the way from the retailer’s perspective? Swinson is quick to point to the bigger picture – a retail ecosystem with everyone playing their part.

“It’s important to recognise that confident customers are good customers. If you feel safe when shopping, particularly online, you’re more likely to try new retailers, to take a chance on someone new. And that’s great for competition.

“But the pressure on retailers is very real. There’s a temptation to encourage sales of things that have a high likelihood of being returned. The received wisdom is that a large order is a good thing – but that’s far from always the case.”

As Clear Return’s CEO Vicky Brock stated in eDelivery last month, an item sold is only really sold if the customer intends to keep it. With 5% of shoppers generating in the region of 20% of returns, a lot of sales are not real sales at all.

“Retailers need to start considering how they can use data to identify, track and fix problem areas,” Swinson says.

Cost benefits

This is something Niklas Hedin, CEO of Centiro, another player in the delivery management sector, agrees with.

Niklas-Hedin-Centiro

Niklas Hedin, Centiro

“The convenience of returning items purchased online is increasingly influencing where consumers shop. Indeed, research we carried out with YouGov and JDA found that a nearly two-thirds of UK adults factor the ease of being able to return items online into which retailers they shop online with. The UK’s formalisation of longer full refund rights will likely only serve to increase returns volumes, continuing the momentum of this trend,” he says.

“Retailers need to move away from treating returns as simply a cost-recovery exercise. In the same way that today’s omni-channel environment is allowing consumers to buy items where and when they want, they would like the same flexibility when it comes to returns.

“Through linking CRM and delivery management systems, retailers can offer a more personalised returns experience, which in turn can further enhance brand loyalty. For example, a retailer could provide regular high net worth customers with different returns options, compared to those customers who don’t shop regularly with them. This could take the form of a certain number of free deliveries throughout the year, or more precise pick up windows. Ultimately, in an increasingly competitive market, a more personalised approach to returns could help many retailers differentiate their service.”

What does that look like day-to-day? Swinson takes a pragmatic stance. “Something like Black Friday can cause some real returns problems,” she says. “You see plenty of encouragement for consumers to buy more. But if it’s done at the expense of looking at where your returns are likely to come from then you’re storing up the problem of returns clogging up shops and taking up employee’s time in that all important run up to Christmas.

“You don’t want shoppers turning round and walking out of your store because they’ve seen the size of the queues of people bringing things back.”

Smarter offers

As a nation, we’re really only four years into the Black Friday phenomenon, but it’s already a headache of significant proportions; can you afford not to slash prices and promote aggressively? But can you afford to deal with the consequences of so doing?

There’s never been a better time to make friends with data, Swinson advises. “Businesses need to make sure they have all the right information at their fingertips.

“You have to focus on giving people what they want. There’s significant cost, not to mention hassle, from dealing with returns. That cost is a real burden and is something shoppers have no idea about.

“So instead of focusing your marketing efforts on absolutely everyone, why not use the data you have to figure out who your best customers are. Should you, perhaps, focus more on the shopper who places smaller orders, but keeps most of what they buy? Or on those who place bigger orders yet make a lot of returns?

“Everyone benefits from retailers being smarter about the way they use data. And it’s data they’ve got – they just need to work with it. After all, we are all familiar with data being used in many other walks of every day life, so why not here too?”

Will better data analysis, and evidence-based strategies, be enough to cope with an influx of returns though, or is it incorrect to assume the new laws will simply encourage shoppers to send more things back?

Don’t panic

Judy Blackburn, who heads up the supply chain practice at Kurt Salmon, is one person who isn’t panicking about a flood of returns. “Even though the new Consumer Rights Act has come into force, there’s not really a great deal of change for the retailer,” she thinks. “Shoppers now have the right to a full refund for faulty goods 30 days after the item was purchased, rather than 14 days it used to be.

Judy Blackburn, Kurt Salmon

Judy Blackburn, Kurt Salmon

“Many retailers were already offering returns up to 28 days, or longer, so I don’t expect to see it impacting the retail supply chain. It’s more likely to affect manufacturers but faulty goods are a small proportion of retailers’ sales.’

Jo Swinson thinks better information and training can also help reduce return rates for faulty goods. “The most common reason for returns of electrical goods is that a product is faulty. Yet when tested, data shows less than 5% of these goods have an actual fault. This may be due to consumers struggling to get to grips with a new product or failing to set it up successfully once they get it home.”

But what of a returns tsunami, does she think that will materialise in the wake of the new law?

“The Act is all about making things clearer. Prior to the Act you could return something within a ‘reasonable’ amount of time. But that’s just too woolly – we wanted to provide certainty.

“Will it create more returns? I don’t know, I’m not sure. But I hope it will make retailers think more about the way they sell to people, the offers, the advice, the information, the guidance.

“There’s no doubt that clearer refund rights will require retailers to get smarter and faster at data capture and testing returns – but the highest impact outcome of all will be to better meet customer needs so shoppers want to keep more of what they buy in the first place.”