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ASCG Returns White Paper February 2020

Delivering Customer-Centric Returns


Customer returns is a hot topic. Varying reports estimate that reverse logistics costs retailers billions of pounds every year. This has led to returns becoming a strategic priority in boardrooms and a subject splitting opinion throughout the world of retail.

Delivering Customer - Centric Returns

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Foreword I’ve read articles where returns have been described as a plague attacking profit margins, whilst I’ve had many discussions with retailers looking to embrace customers sending items back, as they know this can address margin dilution and create competitive advantage. While opinions and attitudes towards returns differ, one thing that remains a constant, is that returns are growing. With this in mind, we wanted to look at how two key consumer trends of ‘social media commerce’ and ‘sustainability’ will impact online shoppers purchasing and returning items, and affect supply chains. Advanced Supply Chain Group is a B2B operator and we don’t deal with consumers. However, the shopping habits of consumers effectively shape the supply chains of our customers, which includes a mix of well-known high street and ecommerce retailers. By better understanding consumer trends, we can create supply chain software and solutions that help our customers respond to fast-changing markets and challenges like returns. It’s an approach that helped us, in partnership with ASOS, to win ‘Best Innovation in Fashion Retail’ at the Drapers Awards 2019. We surveyed 2,000 online shoppers about returns, social media commerce and sustainability. We share the findings from this research in this white paper, while focusing more on the rise of shoppable social media and an evolution of ‘lean and green’ supply chains. One of the key points the research reiterated for us as a business, is that there really is no room for making assumptions and insight must drive innovation. For example, some retailers are considering returns policies that limit the number of items consumers can buy. This is designed to address the growing number of shoppers buying multiple items with the intention of making returns. It seems logical that such a policy change, which conflicts with widespread consumer buying habits, will deter shoppers. The research showed this isn’t necessarily the case.

16%

45% of respondents said such a policy wouldn’t affect their decision to shop with a retailer. 19% said they would be more likely to buy from a retailer implementing such a policy.

Online shoppers were asked-

Whilst a similar number (20%) said they would be less likely to use that retailer. 16% were undecided about whether it’d affect their decision to shop with a retailer.

Read on to find out more insights from the research, and we hope you find it as interesting as we did.

19%

45%

would returns policies limiting how many items you can order affect your decision to shop with a particular retailer?

20%

Ben Balfour

Commercial Director Advanced Supply Chain Group

Delivering Customer - Centric Returns

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Research of 2,000 online shoppers showed:

£

More returns for retailers

Shoppable social media

63% of impulse shoppers (equivalent to one fifth of all online shoppers) will end-up sending more items back to retailers

Direct selling tools on social media will encourage 34% of online shoppers to buy more on impulse

Pain of paying

I want my money back

22% find paying for a return the most frustrating thing about sending an item back

Waiting for a refund is the second biggest frustration for 20% of consumers returning items

I want easier returns

£

While shoppers want easier returns, 51% wouldn’t pay for a service where returns are collected from them

18% of consumers find the difficulty of returns the most frustrating thing about online shopping

Going green? 43% of online shoppers would be more likely to shop with retailers offering ‘greener’ returns services

Delivering Customer - Centric Returns

Cost over convenience

Pack it in Repackaging a return frustrates 17% of online shoppers

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Shoppable social media means retailers must embrace customer returns Delivering Customer - Centric Returns

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ASCG Returns White Paper - February 2020

advancedsupplychain.com

Shoppable social media means retailers must embrace customer returns Social media platforms are becoming increasingly shoppable. They are no longer just advertising products to consumers; they are becoming sales channels in their own rights. Advanced Supply Chain Group’s (ASCG) research of 2,000 online shoppers shows this evolution in social media will lead to consumers sending more items back to retailers and the need for ecommerce to take a more positive approach to customer returns.

Growing social media commerce Ecommerce has come a long way since the first secure online transaction was completed in 1994, with increasingly sophisticated advertising and sales tools making online shopping more targeted and convenient. It is now quicker and easier for consumers to find products they like, put these in their baskets and check-out. This is leading to exponential growth in ecommerce, with the most recent Government figures showing internet sales account for around a fifth of total UK retail sales. This proportion of sales is on the cusp of significant growth, with social media commerce set to make online shopping even more relevant and convenient.

Government ONS data shows internet sales as a percentage of total UK retail sales 25% 20% 15% 10% 5% 0% 2006

2010 March

2013 July

2016 November

2019 December

Platforms like Facebook, Instagram and social video app TikTok, are all focusing on enabling their users to buy products within their sites. This heralds a huge shift in shoppers’ buying journeys. Consumers are already receptive to advertising as they scroll through social media. It is a natural next step for them to shop whilst they are socialising, rather than having to click-out of the social platform to a retailer’s website. Shoppable social media will prompt massive growth in social commerce. PayPal’s annual commerce index predicts the number of UK businesses selling on social media will double in the next six months.

Delivering Customer - Centric Returns

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ASCG Returns White Paper - February 2020

advancedsupplychain.com

Social shopping habits Looking beyond growth opportunities, it is important to consider how social media will impact consumers’ buying habits. ASCG’s online shopper research shows social media platform selling tools will encourage 34% of consumers to buy more on impulse. This is great news for retailers, many of whom work hard to encourage spur of the moment purchases. Impulse buying can prove a valuable revenue stream, bulking-out baskets through cross and up-selling. The research also shows that 63% of these impulse shoppers are more likely to return items. This means shopping on social media will see a fifth of all online shoppers sending more of their purchases back to retailers.

However, the growing number of impulse purchases are also a good indication of how ecommerce is increasingly becoming a two-way transaction between retailers and consumers.

This presents retailers with a huge challenge. They have to contend with a growing proportion of sales which will effectively generate no revenue, but still appear on the balance sheet as a cost. This is causing margin dilution and, in many cases, is leading to supply chain strategies and returns polices being dominated by cost-first decisions. On the surface, this can seem a logical approach. If returns are costing the retailer, why not charge consumers to send products back? It covers the costs of ‘phantom sales’. This simply won’t work. The online shopper research shows ‘paying for a return’ ranks as the biggest frustration for 22% of online shoppers when sending a product back. Consumers simply don’t want to pay for receiving or sending back goods. They are value-conscious and want their money to be spent on goods they are buying as opposed to transportation.

Frustration factors for shoppers returning items 21.85%

Paying for the return

19.90%

Waiting for a refund

17.80%

Repacking it

17.55%

Having to take the item to a post-office/collection point/store etc

8.75%

Completing paperwork Not knowing the status of the returned item None of the above 0.00%

6.55% 7.60% 5.50%

Delivering Customer - Centric Returns

11.00%

16.50%

22.00%

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ASCG Returns White Paper - February 2020

Embracing returns Instead of making cost-first decisions about their returns policies and supply chain management, forward-thinking retailers are focusing on making returns consumer -centric. They are being innovative and actively addressing consumer frustrations.

advancedsupplychain.com

The most astute retailers are those who realise returns are an essential part of the sales cycle.

Technology can help minimise consumer pain points such as ‘waiting for a returns refund’, which ASCG’s research found to be the second biggest frustration for 20% of online shoppers. With the right software, a retailer can effectively track a return through the supply chain, meaning they can keep consumers updated about the status of the return and refund them more quickly. They can also better manage their own stock inventory, maximising the prime condition and sales availability of returned stock.

Consumer-centric supply chains Social media commerce is still very much in its infancy and has huge potential to influence the future growth of ecommerce. As online shopping continues to grow, so will the volume of returns and the importance of placing consumer trends at the centre of supply chain management and returns policies.

By placing consumers at the heart of their supply chain strategies, retailers will drive greater levels of consumer satisfaction and repeat sales. To truly achieve this, it’s important not to make assumptions and to make decisions based on data and insight. For example, it may come as a surprise to some retailers that our research found that placing a limit on how much consumers can order in an attempt to reduce returns, would not matter to 45% of consumers. It wouldn’t influence their decision to shop with the retailer or not. The research also showed 19% of online shoppers would be more likely to shop with a retailer making such a move, compared to 20% that would be less likely to shop with a retailer limiting the number of items ordered. Social media and online shopping are evolving in response to consumer trends. Returns and supply chain strategies must do the same if retailers want to drive sales in an increasingly competitive market.

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Sustainability will drive a trend of ‘lean and green’ supply chains Delivering Customer - Centric Returns

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ASCG Returns White Paper - February 2020

Sustainability will drive a trend of ‘lean and green’ supply chains Sustainability has become a huge focal point for the public and will drive a trend of lean and green supply chains in 2020. Many businesses are already investing in programs to reduce their carbon footprints and we will see greater focus placed on enhancing such initiatives through eco-first efficiencies.

advancedsupplychain.com

The growing importance of sustainability will see this prioritisation shift towards making supply chains leaner, so they are ‘greener’.

Supply chain management has long embraced strategies and solutions for optimising efficiencies. Think Six Sigma and Just In Time. This has seen the prioritisation of eliminating waste and improving processes to drive down costs and boost margins. The growing importance of sustainability will see this prioritisation shift towards making supply chains leaner, so they are ‘greener’. Manufacturers, retailers and supply chain operators all realise the end-customer - the consumer - generally wants to be more sustainable. However, consumers also demand value. This was evident in ASCG’s online shopper research of consumer attitudes towards returning items to retailers - an action which can increase the carbon footprint of supply chains.

Research data showed 43% of consumers would be more likely to shop with retailers offering ‘greener’ returns services, but only 23% would be willing to pay for such a service. A much higher proportion of shoppers were more inclined to opt for a no-cost returns service over one that was more environmentally friendly. Companies realise they must make sustainability cost effective. Being ‘green’ needs to be affordable for consumers. This will see supply chains becoming leaner and greener and more innovative in three key areas:

1. Returns and reverse logistics As well as incurring more transportation miles, consumers sending items back leads to margin dilution, which squeezes the ability to offer value-added services like low- and no-cost deliveries and returns. In turn, this affects competitiveness and sales, therefore limiting the opportunity to reinvest in supply chains and enhance important areas like sustainability. By enhancing reverse logistics to better process items coming back, goods can be quickly and effectively restored to prime condition. This maximises the availability to sell products, while also improving efficiencies through optimised time and resource management. Further transportation miles and associated carbon emissions can be saved through the more centralised and coordinated control of reverse logistics. More immediate decisions can be made in the returns centre about the quality of returning stock and the feasibility of it being restored to prime condition for resale. This helps minimise the carbon footprint of moving, handling and responsibly disposing of damaged goods. This whole approach is a much leaner method, meaning retailers aren’t firefighting to tackle the costs of returns and can focus instead on eco-initiatives. We’ve already seen forward thinking retailers like ASOS launch plans to trial reusable mailing bags in 2020. This is part of its commitment to reducing plastics in its operations. Elsewhere, we’re seeing more and more retailers using GreenPE mail bags. Packaging manufacturer Duo UK was the first in Britain to make these bags from a renewable and sustainable source, sugar cane. The bags are also resealable, meaning they are reusable.

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ASCG Returns White Paper - February 2020

advancedsupplychain.com

2. Talent management Automation has been a driving force in supply chains becoming more efficient and now there’s growing excitement about the possibilities of Artificial Intelligence (AI). This has inadvertently meant the importance of people and human intelligence is often overlooked. This is contributing to a serious skills shortage and making it difficult to attract new talent to the logistics sector. A report from the Chartered Institute of Logistics and Transport (CILT) and Statista highlights that although office staff, vehicle drivers and warehouse workers are the most likely to be in high demand, software engineers, project managers and executives are the hardest roles in logistics to fill. This challenge will drive a renewed focus on talent management as supply chains become leaner and greener. Supply chain operators will leverage the growing public interest in sustainability to showcase the importance of IT and management roles in reducing waste and carbon emissions. Beyond IT and management, we will also see logistics companies unlocking efficiencies through better engaging people involved in quality control and the day-to-day running of supply chains. These people are at the coalface and can influence so-called marginal gains, which further eliminate waste. Through a combination of training and development, and internal communications, companies will be able to better share and implement employees’ ideas for ways to improve sustainability.

3. Stock inventory management Supply chains are becoming increasingly smart and connected. With the right software and data analysis, retailers can better predict the flow of goods, both in and out of their businesses. They can also glean a more accurate view of where stock is in the supply chain to the determine the optimal time to move goods. Variables such as flow of traffic and weather conditions can be better accounted for. Improved tracking, stock visibility and data analysis means transportation miles can be minimised. The Government’s investment in the strategic road network from 2020, and the ongoing development of the Road Investment Strategy, will create further opportunity for retailers and supply chain operators to better control the movement of stock. In the meantime, there’ll be more of a shift towards businesses investing in systems that provide instant and real-time data about stock inventory management and performance. Having end-to-end visibility of the supply chain, which is informed by constantly updating accurate information, helps inform more precise demand forecasting. This minimises the gap between supply and demand, creating a more efficient route to market for goods, and optimising inventory management. It’s a lean and green way of reducing carbon emissions and fuel costs. Manufacturers, retailers and supply chain operators are already at the fore of embracing sustainability. They are embedding corporate responsibility within their operations and driving an ‘eco-first’ approach to being lean. This benefits balance sheets and makes sustainability attainable and affordable for their customers. Put simply, lean and green supply chains create competitive advantage, which is why they’ll be a growing trend in 2020 and beyond.

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For further information about Advanced Supply Chain Group’s research of 2,000 online shoppers or to discuss how customer returns can create competitive advantage for your business, please contact:

Ben Balfour e: ben.balfour@asc.group t: +44 (0)1274 470507 www.advancedsupplychain.com

Advanced Supply Chain Group 606 Building, Wharfedale Road, Euroway Trading Estate, Bradford, BD4 6SG, United Kingdom.

Profile for Advanced Supply Chain Group

Advanced Supply Chain Group: Delivering Customer-Centric Returns  

Customer returns is a hot topic. Varying reports estimate that reverse logistics costs retailers billions of pounds every year. This has led...

Advanced Supply Chain Group: Delivering Customer-Centric Returns  

Customer returns is a hot topic. Varying reports estimate that reverse logistics costs retailers billions of pounds every year. This has led...

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