Many happy returns?

— 05.02.20

by Caroline Foster

Britain is the biggest online shopping nation in the developed world. But the convenience of online shopping comes at a cost to the environment and retailers, and the negative impact is growing.

More of us than ever are shopping on the internet. In the UK around 60 per cent of shoppers buy goods and services online, making Britain the biggest online shopping nation in the developed world. And alongside that explosion in online shopping there’s been an accompanying increase in online returns. Approximately 68 per cent of us consider the returns policy before even completing the purchase. We commonly order multiple sizes or colours, safe in the knowledge we have a convenient returns option if we don’t like it. But, that convenience comes at a cost to the environment and retailers alike.

Retail returns management is the process by which products are returned to a retailer. A Reverse Logistics Toolkit has been developed by researchers at the University of Sheffield, Sheffield Hallam University and Cranfield University. It’s designed to enhance returns processes, reducing costs and environmental damage.

It’s estimated that returned purchases are costing retailers in the UK around £60 billion a year from additional processing costs to retailers and along their supply chains. Typically over 90 per cent of returned clothing can be processed and made available for resale, however, sometimes the returns process takes too long and it becomes too dated to sell. This wasted inventory has an environmental as well as economic cost - often ending up in landfill after being produced, delivered and returned, all of which are energy intensive processes. The same can be said for other returns items, although these often need more processing before they can be resold - a part may be missing or broken for example.

Many of us are unaware of what happens once we send our parcel back. The contents go on quite a journey. An item of clothing, for example, has to travel back to the warehouse where it’s processed, and may be cleaned, repaired, have any smell removed, and then has to be repacked ready for a new owner to try it on and send it back again. On average, an item could go to three to four potential owners before it’s finally retained. If we consider a T-shirt that’s on sale for £10, with free delivery and free returns, this represents a huge loss for the retailer and the environment when we think about the number of £10 T-shirts there are. It takes multiple journeys and then there’s the cost of producing the T-shirt in the first place.

A lack of adequate processes for dealing with these returns only makes the problem worse, therefore effective returns management has emerged as a key challenge for companies. How can we stop unwanted gifts, Black Friday sales and Christmas jumpers from encouraging unsustainable shopping habits?

With this question in mind, University of Sheffield Researchers Dr Erica Ballantyne and Professor John Cullen from the Management School, Cranfield Universities' Associate Professor Mike Bernon, and Sheffield Hallam Researcher Dr Jonathan Gorst, have designed a way to reduce this burden all year round. They’ve developed a Reverse Logistics Toolkit which has the ability to identify areas of opportunity for processing returns.

“For a lot of companies returns can be a costly process. What we’re doing is helping companies turn this into an opportunity and an income stream using our Reverse Logistics Toolkit.”

Dr. Erica Ballantyne

The Reverse Logistics Toolkit

The Reverse Logistics Toolkit has been developed with and for companies within the logistics and retail sectors. It’s designed to help an organisation self-diagnose the current state of their reverse logistics operations by identifying ways their performance can be improved. Using a traffic light system and a series of statements, the company is able to rate itself on how well they’re operating in a particular area. This could be Cost and Performance Measurement; Sustainable Distribution and Circular Economy; and Avoidance of Product Returns and Customer Experience for example.

The benefit of this technique is in its simplicity. The traffic light system is universally known and works as an easy to understand visual representation of the problem areas which is key when engaging with the workforce at all levels. It can also be used repeatedly allowing companies to continually measure their approach to the returns process and therefore improve it.

Improving the process along the supply chain is key to reducing economic and environmental costs. But interconnecting the supply chain has also become an important role for the team. Giving value back to the returns process can take many different forms for companies. Something as simple as intact packaging can be the difference between an item being sold at full price as new, or at a discount as damaged. Erica, Jonathan and John have connected different companies across the supply chain to give value across the entire returns process.

Ribble Packaging, a cardboard and packaging specialist now work with multiple retailers improving their processes by providing machinery which custom makes packaging boxes on demand for example. This has benefits for both parties, but ultimately provides the retailer with the opportunity to resell a product for it’s full value, potentially unlocking millions of pounds of additional revenue for the industry as a whole.

The Reverse Logistics Toolkit is now being used by companies across the sector, including third party logistics providers, manufacturers like Ribble Packaging, and leading retailers around the UK.

Find out more and use the Reverse Logistics Toolkit to self-diagnose your business's logistics performance.