Online shoppers return a growing number of their purchases worldwide. Exact numbers are hard to find, as most of the retailers never disclose this information. Therefore, we need to rely on customer surveys and data collected from delivery companies. One rare exception to secrecy is German Zalando, who shipped 90 million packages to 15 European countries in 2017. They report that approximately 50 % of them were returned. According to Clear Returns consultancy, in women’s fashion the return rate in Germany is 70 %, and interestingly the UK figure is only 25 %. At the other end of the scale are electronics and furniture, where the returns rate is around 10%. With these figures in mind, it’s easy to see why the sustainable online shopping is a challenge which companies across the globe are facing.

Online shoppers and intentional returns

Let’s take an example. One needs a new shirt. The online shopper orders five shirts, to make sure the size and colour match the need. The traditional shopper goes to the nearest shop and selects a shirt that fits. At this point the traditional shopper is satisfied and has consumed the energy needed to move to the shop and back, and the shirt has travelled from warehouse to shop. The online shopper, on the other hand, returns four of the shirts and keeps one. For this one shirt the energy consumption is approximately the same. But four shirts have been traveling from the warehouse to the shopper and back to a returns centre, for practically no reason.

The pattern described above is called intentional returns, which is especially high among fashion shoppers. According to recent study by Brightpearl the retailers are facing a “Returns Tsunami” as the Try-Before-You-Buy trend intensifies.In UK the intentional returns seem to affect all product categories, even electronics at around 7 %. Clearly, moving goods back and forth without even an intention to buy, can’t be sustainable. It gets even worse when we look at what happens to the goods once they are returned.

The destiny of returned goods stays behind a veil of secrecy

What really happens to returned goods is not known – online retailers rather keep the veil of secrecy than openly tell about the waste. Even though large online retailers like Amazon claim that only returned goods that couldn’t be sold again safely were destroyed, Amazon staff has reported fully functional items heading to a huge waste press. Zalando has given out some numbers, they claim that only 0.5% of returns are destroyed, the rest donated, sold at discount or re-packed and sold as new.

Typically, a returned package travels through seven hands before it ends up for sale again, says the Brightpearl study. Paradoxically, it seems that the number of people selling goods to people is in decline, but the number of people handling the returns is increasing! For retailers the handling of returns costs at least double the delivery and it can go up to triple.Add in the number of goods wasted and it’s easy to see that the margins are getting thinner. The fashion industry is especially affected as the life cycle of products is getting shorter and shorter. There are even rumours that some of the big names sell lesser quality online versus stores, to counter this.

Grocery shopping online – more sustainable than shopping in a conventional store?

There’s one exception in the business, where returns are not generally possible: the groceries. As opposed to other online retailers the groceries can actually lower the waste rate compared to conventional stores.One big warehouse can serve a big city, compared to the chain of stores where controlling the product freshness is far more complicated. Counting in the delivery the online grocery is most likely more sustainable than the conventional.

I’m convinced that the high energy consumption and the waste of returned products in online trading will become an issue in the future. This combined with the declining margins is going to take the conventional store back in business again. I will discuss this further in my next text.

Interested in this topic? You might want to browse through my previous blog post about the growth of the online grocery shopping market.

 

Risto Vuorenrinne has worked in real estate business for 20 years. He holds a master’s degree in laws and engineering. In Trevian he’s responsible for new investments of international investors. Prior to joining Trevian Risto has worked with the world’s leading private equity investors advising them in acquisitions of assets In Finland. He has a long experience on commercial property development.