How Do E-Commerce Retailers Handle Excessive Returns?

The fast fashion business model, which promotes frequent purchases of inexpensive and non-durable things, has a particularly bad environmental impact on the fashion industry, which may be responsible for up to 10% of world carbon emissions. In addition, about 20% of online purchases, including garments, are subsequently returned, with some of those items ending up in landfills.

According to the all-in-one returns platform Optoro, 2.6 million tons of returns were disposed of in this manner in the U.S. alone in 2020. Because of how well-known the problem has become, the e-commerce store Boohoo recently started charging for returns in an effort to discourage customers.

How Do E-Commerce Retailers Handle Excessive Returns

Why are returns occurring at such a high rate, and why are so many returned goods not being resold? Consumer behavior was profoundly altered by the pandemic, and online retailers benefited from the temporary closure of traditional storefronts. However, the growing market share of internet retail can be traced back to long-standing fast fashion marketing strategies. Customers are encouraged to purchase many options with the understanding they can return products freely and easily because newness, low prices, free shipping, and returns are prioritized.

Online spending has been further boosted by buy-now-pay-later programs like Klarna that let users order without making advance payments. According to research, shops will typically see a 68 percent boost in average order value by providing such "payment solutions." Even still, market research indicates that the adoption of such payment options reduces cart abandonment rates by about 40%.

Fast fashion and returns go together

Despite the allure of reductions and low prices, fashion goods that are mass-produced sometimes have problems with fit and quality, leading to disproportionate returns. Impulsive spending that is motivated by discounts also frequently results in buyer's remorse, which ups the likelihood of returns. In light of this, the predicted return rate for clothes orders is 32 percent, far exceeding the rate for other e-commerce industries like consumer electronics, which is only 7 percent.

Processing refunds presents uncertainty and complication for online retailers. It is unknown which things will be returned and in what condition. It is frequently difficult to make products appealing for repurchase once they have been used. This is especially true in instances of "wardrobing," which involves wearing a purchased item once before returning it. Retailers risk a negative reputation if worn or broken items are resold to customers in addition to cash loss from reprocessing.

By terminating the accounts of fraudulent returners, ASOS will crack down on "wardrobing," as previously reported. However, when a negative review is a possibility, the shop frequently has little choice except to issue a refund. Instead, many stores pass these returns along to liquidators, who sell outdated goods for quick cash. A quick search on eBay reveals numerous pallets of "Amazon customer returns" that are up for auction.

The difficulties that retailers face

Retailers have challenges from processing returns' rising cost as well as their volume. Because of the high reprocessing costs associated with returned goods, the potential profit from reselling fast fashion items is frequently exceeded. This is generally due to the compensation of relatively expensive domestic workers inside labor-intensive returns reprocessing.

Therefore, getting rid of returns is frequently the most economical course of action. ITV said that the internet shopping giant was throwing away tens of thousands of returned consumer goods each week at its Dunfermline warehouse. Such findings were challenged by Amazon, which claimed that all of the products were donated, recycled, or burned for energy recovery rather than ending up in landfills.

According to 2020 research written by Kirsi Niinimäki, Greg Peters, Helena Dahlbo, Patsy Perry, Timo Rissanen, and Alison Gwilt and published by Nature Reviews Earth & Environment, the fashion sector generates about 92 million tons of textile waste annually. 

According to Eco-Age, the annual carbon dioxide emissions from returns of garments exceed those from 3 million cars in the United States alone. (Returns collecting causes the initial release of carbon dioxide, which then rises as returns are either burned or dumped in landfills. Returns can take up to 100 years to fully degrade due to the abundance of synthetic fibers in many fashion items; during this time, they produce carbon dioxide and methane and leach toxic compounds into the soil nearby.

How is the return problem being handled by retailers?

Fashion merchants have a financial motivation to address the problem of expensive returns management, despite the fact that the environmental effects of product returns are obvious. Due to the difficulties involved in reprocessing, fashion retailers are increasingly outsourcing the work to specialized companies, like ReBound Returns, which collaborate with merchants to improve the sustainability of the returns process. 

Through their ReBound Regift facility, for instance, ReBound encourages merchants to donate returned consumer products to charity. This initiative has so far permitted charitable donations totaling £190 million ($229 million).

ASOS, a major online retailer, asserts that no items are disposed of in landfills and that 97 percent of returns are currently resold elsewhere in the market. Several online businesses have attempted to shift the expense of returns onto customers, as evidenced by recent moves by Boohoo and Zara to charge for returns. Although the main justification for this is financial, it is generally recognized that similar regulations have a positive effect on customers' environmental awareness. Since 2015, when a minor fee was implemented, the use of plastic bags has decreased by 97% in England's major supermarkets.

Fast fashion is still popular despite requests for more sustainability in the fashion sector. If marketing strategies that promote waste and fuel emissions continue, the fashion sector will maintain its unfavorable reputation as a major driver of climate change. Retailers are thus urged to balance the requirement for client retention with environmental concerns by taking into account the unintended consequences of the laxity provided by their return policies.


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