Gavin Mounce, e-commerce design manager at DS Smith, explores the different types of returns, why they often are such a problem for e-commerce retailers, and what companies can do to tackle them.
There is no denying that January is the season for e-commerce returns. While this can be a huge pain point at the moment, the problem is year-round for many online retailers and, in some cases, return rates can be up to triple that of bricks and mortar.
Nobody wants an unhappy customer, and returns can be an issue for any retailer. Besides adding complexity, they can also have a significant effect on the overall success of your business. How far do these effects go beyond a customer complaint?
The different types and reasoning behind your customer returns include:
Accidental - Occurs through damage in the supply chain, as the result of rough or excessive handling.
Intentional - When the customer orders multiple colours or sizes of the same product, with the intention of returning some items before they are dispatched.
Superfluous - Caused by a late delivery, or the wrong item being dispatched, leaving the product undamaged but no longer required by the customer.
Preventable - Untrained packers, low-quality materials, and unsuitable designs can all contribute to this type of return, resulting in the product being damaged prior to delivery.
So, how can you provide a customer-friendly returnable packaging?
It starts by having a clear understanding of the supply chain touchpoints that impact the successful delivery of your products. This is followed by analysing your returns data, so that you can design packaging adapted to your greatest quantity, or highest value return type. This gives you the ability to find the sweet spot between the hidden costs of returns and investment required in your packaging solution.
Five key areas that are affected by returns:
Shipping - When the product is delivered damaged, you will not only have to pay for the cost of the return, but there could be additional costs for sending out a replacement.
Using testing protocols for your packaging, like DISCS™, can ensure suitability for your supply chain and reduce the likelihood of damages. In addition, this can support claims filed with couriers, as it can be used as proof of performance, highlighting rough or excessive handling.
Labour - Restocking is not the only labour cost, there is also unloading, opening, and unpacking of the returned packs. There could also be time spent filing a courier claim, and once the product has been returned, it may need to be sold, recycled, or repaired, all of which are drains on time and resources.
Making your packaging returns-friendly with opening features and enabling the customer to use the original packaging can help your staff members reduce restocking time. It is important that they can open and remove the product without causing damage or using tools, as in some cases I have seen items returned in a refuse bag wrapped in parcel tape.
Financial – Refunds or compensation for damaged products, along with an area for processing and storing returns all have financials costs, eroding at your profits and margins.
In this situation, prevention can help to reduce the space required for processing returns, along with refunds or compensation. Again, testing your packaging for supply chain suitability and training your staff in best practices is critical.
Brand – Receiving a damaged item is incredibly frustrating. Your order triggers a dopamine stimulation and then there is the feeling of disappointment when the product arrives broken. It is important to think about “soft costs” in this situation, how much can a negative review, or dissatisfied customer posting images on social media really cost you.
Your packaging is the first point of contact, so good packaging not only shows you care, but that you also value the customer’s order. In some cases, this can have a positive effect and see your customer posting about their great unboxing experience on social media.
Sustainability - Returns shipments not only use additional fuel and emit more CO2, but they also result in extra materials being used and the generation of further waste. Damages and claims are not always tracked under sustainability targets, but they can certainly have a great impact on them.
How much can damage or a return cost?
My wife received a delivery of two small glass cosmetic bottles this week, one of which was leaking. They were wrapped in paper and filled 10% of the overall case volumetric, the material was a good quality and showed no signs of damage upon arrival. However, poor packing in the fulfilment centre allowed the product to move inside and, combined with a box that was too large, resulted in product failure.
The pack had no printed instructions on how to open it, resulting in it being ripped open and making it difficult to return. The packaging should have worked, but poor fulfilment resulted in us contacting customer services, as well as the need for a replacement to be shipped. This damage was caused by not using enough void fill, combined with a poor choice of packing boxes, all of which could have been prevented.
What was the cost of this damage and return? The order was €52.50, which would provide a profit of €10.50 at 20% margin. However, once the replacements had been sent and damaged items returned, the incident created a loss of over €31.50. This means that one damaged delivery requires three further orders of the same value to break even.
These costs and the depth of business that can be affected highlight the importance of understanding and reducing returns.
