Battling the 'returns explosion'

Returns in the fashion and garment sector are not a new phenomenon. But historically, such returns have amounted to a very small percentage of sales.

23% - Average return rate for online fashion

That is no longer true in an omni-channel age. A recent ‘Fashion Returns Review’ by the e-tail trade association IMRG suggests that the average return rate for online fashion goods is 23%. For some lines and brands it can be much higher – anecdotally, over 50%.

Retailers are facing a tough challenge. How to manage returns in order to minimise costs, improve availability, reduce stock obsolescence and maximise margin?

The many fates of returned goods

Returned goods may face a variety of fates depending on condition, obviously, but also location and the costs of the processes involved relative to the goods’ residual value. Ideally, returns in pristine condition can be put straight back into stock where they lie, be that DC or shop. More likely, at least some remedial work will be required, especially on packaging. Quite possibly the need for stock is not where the item is lying, so it may need to be moved to the appropriate location.

With a quarter or more of ‘sales’ being, in fact, nothing of the kind, it is imperative that the retailer has timely and efficient processes for realising the maximum residual value of returned goods at the least additional cost.

Influencing factors

The returns management process is influenced by many factors, from marketing strategy, brand image and customer service to the harder numbers of costs incurred and cash recovered. It has two principal functions – to act as a supplier (and potentially a very agile supplier) to the physical and online fulfilment processes, which is a very positive thing; and rather more negatively, to maximise cash recovery and minimise margin impact from what is, after all, a lost sale.

Optimising this complex situation requires well thought through policies and procedures and acute, generally human, decision-making. It also requires IT systems that can identify, track and progress individual returns through the appropriate procedures and, ideally, back into saleable stock, giving visibility of the availability of returns in the overall stock picture.

More granular visibility is vital

Solutions should enable the effective management of returns in-store, providing visibility to the business that the return has been made and then managing the move back into stock. Or if the return is, directly or through the store, back to the DC, then the system must support the ability to identify the stock and its condition and manage the process for repackaging or other remedial work - ultimately it must manage return to stock in the appropriate location, with minimum re-handling, cost and time.

It is vital that management has more granular visibility by being able to identify stock aligned to specific business areas, for instance returned stock but also stock that is already allocated as part of a click and collect order and so is not available. Through this we can make visible the impacts on replenishment, availability, the validity of the ecommerce offer and the availability to fulfil from store.

In turn this enables management by location which is key in reverse logistics - this area is stock to be returned to the DC, this is goods awaiting Quality Control, these are goods to go to an outlet store, and these are for landfill and so on. This level of granularity allows more effective store management, a greater visibility of the real stock position, improved accuracy, greater ability to fulfil orders, which in turn, leads to an improved customer offer with reduced stock levels. Or more simply, better margins and bigger profits.

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Return rate for online fashion can go up to 50%