On average, 950 items are returned to online retailers every minute in Germany. The use of AI and smart algorithms could stem the flood of returns and thus increase sustainability in online retail.
The global management consultancy Kearney has investigated which technical innovations could be used to reduce the flood of returns. According to a study by the University of Bamberg around 500 million returns in Germany in 2019 were recorded - that's an average of 950 items returned per minute in Germany alone.
This is due in particular to the so-called Bracketing The shopper always orders several versions of an item and returns unsuitable sizes or colours. This trend now affects 56 per cent of all online purchases worldwide. This consumer behaviour is a major problem for retailers and their logistics partners.
In the best case returns cause additional transport, packaging and product preparation, In the worst case, they lead to the destruction of new goods. However, consumers also find themselves in a dilemma: they clearly value sustainability, but at the same time do not want to do without the benefits of e-commerce.
„To be successful in the long term, online retailers need to become more sustainable and address the issue of returns in particular, in addition to carbon-neutral distribution. Smart returns management with the right partners has the potential to improve the customer experience, profitability and competitiveness compared to the online giants and to improve the ecological footprint, especially by avoiding and quickly remarketing returns without long intermediate transports.“ Dr Sven Rutkowsky, logistics expert and partner at Kearney Germany
Algorithms calculate customer needs
With With the help of intelligent algorithms (predictive analytics) retailers are trying to counter the flood of returns by catering more closely to the individual needs of their „problem“ customers. For example, if a consumer has frequently returned trousers from a particular brand due to the fit, the order of search results can be customised for this customer in the online shop. This means that trousers from this brand are no longer suggested first for the customer, thereby reducing the returns rate.
Smart Sorting
It often makes more economic sense for retailers to destroy returns than to process or donate them. With the Smart sorting process the exact resale value can be determined. By analysing numerous parameters (including original value, condition, current demand for the item, reconditioning costs) in real time, it is possible to determine whether a profit can still be made from the item during the first scan. This allows many products that would otherwise have been discarded and destroyed to be efficiently and profitably returned to the sales process.
Paperless returns
The return documents are often already printed out and enclosed with a consignment and end up in the bin immediately if no return is made. Some retailers have now switched to paperless returns. The customer receives the return label digitally, for example as a QR code on their smartphone. When dropping off the parcel at the parcel shop, all you have to do is show the code - without having to print it out yourself.
Bundling parcels in the event of a flood of returns
In the USA, „buy online and return in store“ is already the most popular option for returns. This allows retailers to bundle their returns and send them back to their sorting centres as a full truck load. This not only saves costs, but also protects the environment.
The Start-up Happy Returns in the USA is an example of innovation in this area: it operates numerous return points, for example in shopping centres or supermarkets. Via this route buyers can even return items purchased online without packaging, if the retailer does not have a shop in the neighbourhood.
SourceKearney
