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The online returns pass bill to the trade: three out of ten products are ‘lost’

Repentance in the purchase can reduce the ecommerce companies between 2% and 4% of their turnover

Some e-commerce companies like Amazon are starting to penalize customers who return more products than they buy, who abuse the generous return service. These recidivists are closely monitored and, if they are found to be exceeding, they are penalized. Some companies block them; others start charging for the service, or they make it more expensive.

«The economic surcharge that comes with the returns, the transport of collection, the storage and the necessary work to re-prepare the product and that goes on sale again is one of the biggest concerns for large chains given the impact on the margin that the returns generate” says Ana García de Madariaga, partner in charge of digital services at the KPMG consultancy.

In ecommerce the rate of returned products is 20% but in this post-Christmas period it reaches 50% of sales. In fashion, about 30% of the clothes purchased online are returned. This has important costs for ecommerce companies. The return, for example, “is twice the cost of transport as a delivery, since the logistics process is repeated, but vice versa” (that is why it is called “reverse logistics”), explains the expert.

Many companies include in their annual budgets a heading called “losses for returns”. Here we assume the logistical cost of picking up the products that the customer returns, but also those items that can no longer be put on sale again, for example, a mobile phone that the consumer has already activated but that ultimately decides to return, or a used garment.

On the rise

“Reverse logistics takes on a crucial value in the relationship between customer and online store because it conditions the customer to repeat the sale or not on that web page,” says Francisco Aranda, UNO’s general secretary, the Logistics and Transportation Business Organization. In the last year, the percentage of online shoppers who returned a product rose to 24.5%, compared to 18.9% the previous year, according to employer data. The growth rate of electronic commerce is 27% and exceeds 30,000 million euros annually.

According to sources of the sector, the cost of the reverse logistics can suppose between 2% and 4% of the turnover of the online store, although it depends a lot on the sector. The one of the fashion and textile, the third category more bought in Internet, billed 7,800 million euros in 2017.

“A good management of reverse logistics will depend in part on the profitability of a company,” says Aranda. Clothing, footwear, accessories and sporting goods are the items that are returned the most. The problem comes with other categories. Rafa Torres, CEO of Mactual, an online technology products company, confesses that the losses associated with returns represent more than one million euros in its turnover, 4%. “They are technological products that you can hardly take for sale as new, like a mobile phone,” he says.

In the department of returns (almost all companies have one) it is sought to recover (putting on sale again or returning in turn to the supplier) part of what was lost initially. “You have to reclassify, fine tune to minimize losses,” says the executive.

New destination for products

“It is important to carry out strategies that allow the business to relocate those products returned to avoid a total loss of the value of the product,” they say in KPMG. “When they leave the headquarters they do not come back anymore. They go around the shops until it is given out. The defectives go to the outlets », explains Francisco Aranda.

Even so, the return policies “are one of the best loyalty tools that electronic commerce presents”, they point out in Seur. 94% of online shoppers decide to buy or not based on this aspect.

77% of the returns come from the same customers, the so-called “recurring” ones. Amazon analyzes “each return individually” to verify that the return is justified.

“There are times when we detect that someone is abusing our service and when that is the case, we take the appropriate measures to protect the experience of the rest of the customers” sources from the company explain. Spain is the fifth European country in ecommerce consumption. However, it ranks 18th in logistics efficiency, according to the EAE Business School study.

Also published on Medium.

Published inE-commerce

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