The Hidden Sustainability Impact of Returns That Merchants Should Pay Attention To

Returns are often seen as an inevitability of retail, particularly when consumers are buying online. Between identifying the right size and trying to select the right color or material from a digital picture, consumers face many obstacles when making an online purchase; when they are tripped up, it is the merchant who must pay the price. But recent research shows that the increase of returns is also hurting the environment – and so retailers may want to address this problem more comprehensively.

A recent report by Coresight Research and retail optimization platform Newmine found that retail returns impact the environment in three main ways: by contributing to landfill; by increasing carbon footprint, through the extra return shipping; and by increasing the amount of packaging used per order. Newmine also claims that up to 5 billion pounds of returned goods end up in landfill each year, according to reverse logistics companies.

“This is a pre-pandemic figure and with the increase in e-commerce shopping, we predict a significant increase in the volume of returns that will end up in landfill,” said Navjit Bhasin, CEO of Newmine. “Only about 50% of returned product ends back up on the shelf to be resold, because it’s often more expensive to refurbish and remarket returns than just destroying them or throwing the away.”

This is a vast amount of waste product, which is damaging for retailers’ bottom lines as well as the environment. But this waste can also contribute to bad press and damaged brand reputations, due to the growing consumer interest in the environment. Brands have responded to this interest by launching sustainability initiatives, but the positive work done in those programs could be undermined by their returns output.

Bhasin argues that not all returns can be eliminated, due to the unpredictability of online retail and changing consumer preferences. However, a recent Incisiv report, sponsored by Newmine, found that 73% of returns occur due to retailer controllable actions. If consumers return the product for not matching expectations, the merchant might want to reevaluate how the style is being advertised.

Woman opening or packing a box to return an e-commerce purchase
In-store purchases have around an 8-10% return rate, while e-commerce can see return rates of up to 30-40% or more.

Despite being so prolific, these problems can be difficult to identify within a company. A lot of this data is siloed within different departments and it is rare for a retailer to have a dedicated returns team. One option is for brands to deploy a third-party solution, such as Newmine’s Chief Returns Officer program, in order to collect and analyze this data into actionable steps.

“We use a proprietary natural language processing algorithm to mine product reviews and call center transcripts to diagnose the root cause,” said Bhasin. “From there, the AI kicks in by prescribing targeted actions retailers can take to minimize returns–Such as updating the website copy or imagery, or pulling stock for review.”

This information can also be used further up the supply chain, as needed. For instance, if customers are repeatedly complaining about items arriving damaged, brands might want to speak to their packaging team about improving the security of the merchandise. By deploying a third party solution, this information sharing can be automated and ensure that every relevant team has the appropriate insights.

Newmine’s report partner Coresight has also formulated a Framework for Sustainability in Retail, that companies can start enacting on their own. Improving returns management can support multiple spokes within the framework: improving production quality will reduce the return of faulty items, thus supporting circular models, while minimizing reverse logistics will streamline operations and reduce fuel consumption.

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