The huge volumes of parcels being returned by consumers are proving to be a costly and unsustainable consequence of the pandemic-fuelled explosion in online shopping, experts say.
House-bound and locked-down Australians are driving a generational and quantum shift in shopping behaviour, with online purchasing jumping by nearly a quarter over the year to August, Australia Post figures show.
Younger shoppers, in particular, are taking advantage of retailers’ free shipping and easy returns policies to buy multiple items online, try them on at home, and send unwanted sizes and colours back.
Consequently, parcel returns are growing as fast as online sales.
“We have experienced strong parcel growth and the volume of returns has increased at the same rate as outbound parcels,” an Australia Post spokeswoman said.
The enthusiastic embrace of online shopping and fee-free returns has hidden costs.
“Return logistics is a huge problem for a lot of clients now,” said Travis Erridge, the chief executive of warehouse and supply chain consultancy TMX.
About 5 per cent of Australia’s 77.27 million square metres of warehouse space is taken up by return logistics, TMX estimates, creating a significant negative use of space and substantially increasing leasing and property costs for online retailers.
“But, more importantly, it’s about six times the cost to take a product back, induct it back into their inventory, check for quality or faults, repackage and put it away, and then re-pick it again to sell it,” he said.
Added to that are the extra transport miles a returned item racks up, the disposal and replacement of packaging, and the possibility a product will become redundant and be dumped.
Some sectors are more prone than others. Fashion tops the returns list, while whitegoods generate fewer rejections from consumers.
The broader focus on environmental, sustainability and governance issues sweeping the corporate world is likely to narrow-in on retailing waste. Retailers worried about their green credentials have a potentially toxic problem on their hands.
“Having to put more trucks on the road and more people in warehouses to manage the returns is a significant cost and also a green carbon footprint problem for a lot of clients,” Mr Erridge said.
Items that are re-sold, re-delivered, re-worked or thrown away produce extra emissions. TMX estimates the carbon emissions for the lifecycle of a returned product jump by about 10 per cent.
CBRE’s senior director of supply chain advisory Christine Miller said large overseas retailers also face higher labour costs when repackaging items locally.
“All of a sudden, along with the increased need for space and the free shipping, you’ve got a very expensive process on your hands as a retailer.”
“If returns can’t necessarily be put back into the sales cycle, they do risk being disposed of,” she said.
Accent Group chief Daniel Agostinelli said his firm sticks to international sizing when selling its distinctive Hype, Skechers or Vans sneakers online, a policy that reduces sizing confusion and therefore limits returns.
“We do have returns, but it’s not as big an issue as it is for apparel retailers,” he said.
When items are returned, rather than being taken to a warehouse, they go into a physical store where they are easily checked and re-sold. “We get around it that way,” he said.
Pippa Kulmar, from retail consultancy Retail Oasis, said returns are a “huge issue,” particularly for fast fashion retailers allowing returns up to 30 or 60 days. By that time products may have gone out of season, she said.
One major US department store, Nordstrom, is tackling the issue by opening small format stores that don’t stock or hold any products. Instead, they give shoppers an accessible location to click and collect items, or order and try on garments, have a styling session, or drop off unwanted returns.
Nordstrom are speeding up their turnaround on returned item by an average of eights days as a result, Ms Kulmar said.
Other retailers are offering shoppers a credit rather than full refund to discourage them from purchasing multiple sizes of the same item, keeping one and returning the others.
“You create the behaviour as a retailer if you have free returns,” she said. And having created it, they will need to fix it.