Analysis

Opinion: Free delivery and returns – the snake that eats its own tail

Gary Rohloff, co-founder at Laybuy, explains how so-called free delivery and returns are not such a good deal for the retailer that offers them.

Last year the press reported on a growing trend amongst Instagram users who simply buy clothes to wear once for an #ootd picture – then return them immediately after, at absolutely no cost to themselves. According to the article, in order to avoid being caught in the same outfit twice, many Instagram users have taken to wearing newly purchased items for a quick photo before returning them, taking advantage of the ‘free’ delivery and returns process.

This ‘free’ service for the customer is now an endemic for retailers, as they grapple to account for the huge cost they are forced to incur as a result of this over-used benefit. The reality is, retailers have to account for this increasing cost somewhere along the supply chain, which means suppliers feel the pinch as a result. Something has to give. Put simply, retailers cannot continue to maintain an environment that encourages this behaviour.

The vicious cycle of free delivery and returns has created a culture where consumers no longer view an order as a commitment or a returns system as a problem solver. Delivery expectations, in terms of ease and speed, are ever increasing, so costs are only going to increase as retailers invest in innovative delivery options.

What it boils down to is that delivery is a cost that retailers cannot continue to absorb. This costly back and forth of packages has created a cycle that is hard to get out of: retailers offer free delivery services because they feel they have to, and if they don’t, consumers will shop elsewhere. While there’s no cost involved, shoppers use it as a ‘try before you buy’ service, increasing the demand on returns. The entire offering has shifted from being an added customer benefit to a minimal expectation.

In the UK, the average returned purchase passes through seven pairs of hands before it is listed for resale. According to consulting firm KPMG, to pick and deliver an order costs between £3 and £10 — it can cost double or treble that to be processed on the way back through the supply chain.

Now let’s consider how many packages could be referred to as ‘non-committal’ items, those that are simply purchased to feed a shopping habit, with little expectation of the item being kept. When customers have no skin in the game, there’s little to no value to the order in their minds. There’s nothing to stop them ordering ten outfit options knowing full well they’ll only keep one and return the rest for free?

If there’s a cost at this end of the continuum, it’s offset on the buy side – retailers will work with the cheaper clothing producers to offset the cost of offering free delivery. Those potentially offering less favourable conditions for employees, less safe, less responsible. With one hand the industry must be seen to make steps towards a responsible supply chain, but the other must balance the abacus and make the numbers and margins add up.

If we’re to do something about the industry and this societal shift towards relying on free returns, retailers need to find a way to reduce the number of non-committal purchases. The issue might be tackled through innovative retail partnerships or perhaps providing a wider choice when it comes to services and payments, now is the time to act. In a difficult trading period, its unsustainable for retailers to continue to ignore the growing problem.

 

 

 

 

 

One thought on “Opinion: Free delivery and returns – the snake that eats its own tail

  1. Craig Robertson said:

    I agree totally with what Gary has outlined. Past generations used Appro which enabled them to take product home and simply return to the store, the products they did not wish to purchase. The new digital age has simply reinvented this process with the only difference being you have to pay upfront.
    In the past shoppers were always local and known to the shopkeeper, so Appro products were simply written up in a book with payment only made when the customer decided what they wanted to keep.

    Now days with mass competition and most products fast becoming commodity items, retailers find themselves creating their own downstream issues in order to try and differnentiste themselves and gain cut through in a crowded international market.
    Making returns easy and risk free is seeing many retailers experience return rates that result in their online sales delivering losses once logistic costs are factored in.

    I believe the way forward is to create a reason for consumers to visit the bricks and mortar store ensuring the customer experience is relevant and on-brand but incorporate the convenience of buying on line whilst in store that way minimising any return rates.

    Don’t get me wrong, online is still vital but retailers have to ensure theirs is a seamless way of linking the online experience with the in store offering.

    This may involve investment in technology to handshake the customer. Not easy but necessary to survive in what is a challenging and ever-changing environment.

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