Returns, the hidden cost for the internet business of the big chains

Returns, the hidden cost for the internet business of the big chains


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Electronic commerce advances unstoppable in Spain. Last year exceeded 30,000 million euros in turnover, which showed a rise of 25.7% over the previous year. Despite this, the online sales business still has to overcome significant obstacles, such as the impact of the returns – which already occur on 24% of purchases – in the income statement. The economic surcharge involved in transport by collection, storage for days of the goods and the work needed to re-prepare the product and go on sale again is one of the biggest concerns for large chains that sell online .

«As the volume of online business grows, the costs associated with reverse logistics multiply and in companies with high return rates, which in some product categories can reach 30% of purchases, the deterioration of commercial margins can be noticeable », Explains Victoria Labajo, Professor of Marketing and Retail at Comillas Icade. Labajo speaks directly about the "hidden costs" of electronic commerce as large companies face the double threat posed by the extra cost of returns, which can be twice as much as those of managing a sale, "together with the competition of new operators who have based their value proposition on free and easy returns ».

«As the volume of online business grows, the costs associated with reverse logistics multiply»

To minimize the surcharge involved in reverse logistics, some parcel companies have launched to look for solutions. "To mitigate this negative impact of reverse logistics, it is vital to take into account the sector in which we operate – there are some with a higher percentage of returns than others – analyze competition policies and from there establish our value proposition in this point, integrate it with the rest of the elements of the product or service to find a balance in the return policy, which although attractive to the customer, can be supported by the income statement, "says Ana García de Madariaga, responsible partner of Digital Services of KPMG in Spain.

In this line, Correos launched "Delivery with collection" three years ago to streamline these processes and group operations. With this service you can deliver an appliance and remove the old one at the same time; verify the ignition of an appliance; send credit cards and ask the user to sign the contract or pick up the garment to return and deliver the new size in the same visit. Likewise, in Correos they bet on the Paq Return service. "With this product we adapt the operation for this need since they are not the same needs for delivery as for the return to an 'e-commerce'," says Aarón Morera Alvarez, responsible for Parcel Solutions at Correos.

«We are aware that often it is not enough to return the merchandise and that to ensure the sale the best option is to send another product»

"The great differentiating element is to give the option to the buyer to go to one of our more than 2,300 offices and, what's more, we also put at your disposal 4,000 CityPaq to deposit your shipments or if you prefer to arrange a pick-up at home of the merchandise" , says Morera. "In addition, we are aware that often it is not enough to return merchandise and that to ensure sale the best option is to send another product. This situation is common in size changes for fashion purchases and becomes critical in situations of shipping errors. For these needs, we complete the Paq Retorno with the Delivery with Collection ", says the person in charge of Parcel Solutions at Correos.

In MRW they have also put their hands to work with a 100% online platform that offers up-to-date information on the status of returns and with pre-warnings about the procedure as well as the option to create reports by campaign. "The approximately 1,500 web clients who already trust in MRW Returns and their solution so that the management of the returns is no longer an obstacle for their customers drives us and encourages us to continue working in this line", says Guillermo Marcos, director of Marketing and Communication of MRW.

«A key and sensitive point of the online purchasing process is the management of returns, just in this area the messaging is a key player so that the service is efficient and meets the expectations of both the customer and electronic commerce avoiding extra costs to both. The returns have mainly two impacts: on the one hand, the immobilization of the merchandise since during the time that the return lasts is not for sale and, on the other hand, the possible losses of customers since if it is dissatisfied with the management of the return will not repeat », adds Marcos.

An "app" to measure up

There are also digital tools that try to stop the problem from the moment the purchase starts. The application Naiz Fit arises in order to reduce the rate of returns in the fashion sector, which are 27% to 30% worldwide, according to data provided by its CEO, Borja Cembrero. This "startup" offers size recommendations integrated into fashion portals and also works independently in collaboration with some 600 brands. «Any buyer can download the application and filter the garments of different brands that adapt to their size», explains Cembrero. With this application it is possible to reduce garment returns by 15 to 20% and also increase consumer confidence, says Naiz Fit's co-founder. "Each return costs about 17 euros to a company for the cost in collecting the garment, re-store and prepare it to put it again for sale," says Cembrero.

«Each return costs about 17 euros to a company for the cost in collecting the garment, to store it again and prepare it to put it on sale again»

The creators of Naiz Fit guarantee to the client that with only two photos and introducing their weight and height they will be able to find in an exact way clothes of their size coming from their favorite shops. Also, some companies have incorporated this tool into their own website. Among them, the Spanish brand El Ganso has integrated its technology to help the customer get it right from the first purchase.

Invest in the client

From the point of view of the client, the cost of the returns is also key. 18.40% of Spaniards take into account the ease of carrying them out, according to the Confianza Online & Showroomprive study. Consequently, "the correct management of returns" is fundamental from the perspective of the customer experience. "The ease of making a return and the rapid refund of the product amount give confidence when making purchases", as recorded in the White Paper of logistics for electronic commerce of Adigital.

In this sense, Nacho de Pinedo, CEO of the digital transformation school ISDI, considers it important to differentiate between two types of returns: when the package could not be delivered or when the consumer does not want it. In this second case, De Pinedo indicates that it is "an investment in the client", which in the long term is an improvement for the business.

On this point, Victoria Labajo adds that "the return policies where the return of the amount is not guaranteed" are one of the big problems facing the online consumer. This obstacle is joined by others such as «the perception of insecurity in payment systems; the doubts regarding the conditions of the delivery, the problems of design of the web of purchase and the lack of flexibility or adaptation to the preferences of the buyer ».

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