Online fashion retailer Boohoo has reported a healthy 14% increase in sales to £2bn. So far so good. Yet profits have slumped by 94% to £7.8m. Ouch! So where did that come from? The company blame returns culture for the change in fortune.

Social media is saturated with Gen Z influencers videoing their latest online purchases, often clothes, toys, electronics, and makeup. These ‘unboxing videos’ have viewing figures to rival the population of the UK – one Youtuber gained 63 million views for unboxing a plastic truck from Disney’s Cars 3. Of course, unboxing videos have huge marketing power, and so brands send influencers huge ‘hauls’ of products to pick their favourites from.

Young peoples’ sales orders are deliberately larger than needed

Young people are increasingly emulating this trend by placing large orders with retailers like Boohoo, Asos and Zara, with the intention to keep pieces they really like and send back the rest.  

Several companies, including Boohoo and Asos, offer year-round next-day delivery privileges for around £10. The abandoned shopping basket is the enemy of fast fashion, so companies are under pressure to remove all barriers to a swift impulse-buy. The cost of returns is one such deal-breaker for shoppers, and competition drove consumer return costs down and then to zero: which feeds the impulse-buy cycle again.  

More than 1/4 of online purchases returned to vendor

However, mis-packed packages, incorrect items or simply unliked products contribute to roughly 30% of online purchases being returned. Global strategists Roland Berger recently priced the cost of returning a £30 item bought online at a massive £20, thanks to transportation, reprocessing and repackaging costs, and fraudulent returns (buy on Friday, wear on Saturday and return on Monday). Only 50% of returns can be sold at full price, and a vast percentage of the rest goes straight to landfill. The environmental cost of shipping back to the retailer is unimaginably huge – returns transportation emits around 15 million tonnes of CO2 in the UK.

Clearly, the ecommerce returns industry is unsustainable in its current form - neither environmentally nor economically. The FT warns of an impending global recession caused by lockdowns in Asia, inflation in the US and the cost-of-living crisis in Europe. Closer to home for the logistics industry, there are supply chain bottlenecks and soaring fuel costs.  

To remain sustainable economically and environmentally, the logistics industry urgently needs solutions

Anthony Baxter, Director at warehouse technology firm Logisticomms, commented:

"The market forces towards free returns and the costs of reverse logistics will not disappear overnight, so how can we help to relieve the pressure on ecommerce retailers? I believe there are money-saving strategies retailers can and must immediately implement to reduce reverse logistics – for example as we have seen this month with fashion giant Zara, adding a cost to returns to make consumers think twice about ordering more than they intend to keep. Eventually will this culture of returns become such a hot topic that it will be seen by consumers in its real toxicity and become a mark against those brands which persist in facilitating it?

In the meantime, at Logisticomms we have developed a system to help reclaim the profit lost to reverse logistics in another way. With the flagship VideoAudit VMS, every outgoing item can now be tracked by CCTV throughout its journey, so customers can be sent a timestamped image of the box at packing stage, to disprove costly claims of missing items. Fraudulent claims of missing or incorrect items accounts for roughly 10% of returns, so retailers should see an immediate improvement on their bottom line.

Secondly, the VideoAudit system integrates with the WMS so processors have instant visibility of every package in the facility, and by easy searching the video footage by barcode or consignment number can immediately view the item to assess its condition and locate where it is in its warehousing journey. Traceability of higher value returns items is key to efficiently recovering profit instead of paying to ship valuable used goods to landfill in bulk, when some of it is still well saleable.”

To discuss how VideoAudit can help your firm save money on returns, contact Logisticomms@anchorss.co.uk