S1 Ep 11
Self-Returns in retail: Removing Friction
Self-returns in retail are a significant cost of doing business online, especially in sectors such as apparel and shoes where returns rates can be 30% plus.
Our 2018 report highlighted the need for retailers to calculate the TRUE and full cost of returns, proposing a true cost of returns model that retailers could adopt to their business.
In this episode Colin Peacock and Professor Adrian Beck consider how retailers are trying to find the right balance between making it as easy as possible for customers to return items in-store, at the least cost while balancing the increased risk of fraud from some customers who might abuse a self returns system.
Podcast summary
Self-returns in retail can significantly reduce the cost of returns for retailers, while still aiming to minimise the risk of abuse and fraud.
Colin Peacock and Professor Adrian Beck discuss why refunds have become a major omnichannel challenge, especially as online ordering (and apparel returns) grows.
They explore the upside of bringing customers back into store, alongside the operational trade-off of convenience versus control, and the need to measure loss so retailers can make clear risk appetite decisions.
Cleaned transcript
Why self-returns in retail matter now
COLIN:
Hello, and welcome to the ECR Retail Loss Sell More and Lose Less podcast series.
My name is Colin Peacock.
I work with a community of experts and academics who are keen to share their latest research findings and best practices.
Every week or two in this series, I’ll be joined by one of those experts and academics to discuss some of the very latest insights from our meetings and discussions and research on best practices.
This week I’m joined by Professor Beck, and we’re looking at self-returns and how self-returns can reduce the cost of returns quite significantly to retailers whilst minimising the risk of abuse and fraud.
We had a session on self-returns, and the premise was that retailers spend an enormous amount of money on returns.
The average cost is around 10 euros, according to a small benchmark survey we did.
If you can take it back to the store, that price comes down because the cost includes the cost of a phone call, mistakes, transportation, checking, and all the rest of it.
The idea of self-returns is you cut out some of that labour, you cut out some of the telephone calls, and you’re doing it on an app.
We had a couple of retailers present.
One said they did a whole lot of work and it got quite risky.
Another said other priorities took over.
And then we had another retailer talk about how they’d rolled out and were doing millions and millions of returns through self-returns.
Then the other retailers jumped in and shared their thoughts.
It was a really productive call, with about 40 retailers, and a very engaging discussion.
I think there were some really clear takeaways.
What did you put down as the learnings for other retailers who might be joining this recording?
Omnichannel returns and the growing refunds challenge
ADRIAN:
As retailers have increasingly moved into omnichannel, operating not only through bricks and mortar but online as well, refunds have become quite an important issue for them to manage.
As more and more people order things online, the number of refunds, particularly when you’re dealing with apparel, has really ballooned.
It’s become an issue of concern for retailers because if you don’t manage it well you can end up losing money.
If people are using home as their fitting room, ordering five items but only ever intending to buy one, that’s a lot of product for you to process back through your supply chain and deal with.
Cutting costs with self-returns in retail
ADRIAN:
It was interesting to hear how one way to try and manage this was to encourage the customer to return the product back to the store.
There were two reasons why this was important.
One: it reduces the cost because you don’t have the postage and all that element.
Two: you’re bringing the customer back into store, so there’s a potential upsell moment where you can say, while I’m here bringing this back, I’ll have a little wander around.
Some have shown there is a genuine uplift in sales by people returning product to stores, so I could see why it was interesting to do.
Managing fraud risks in self-returns in retail
ADRIAN:
The challenge is there’s always a balance about how convenient and easy you make it for a customer, and what the impact is on your ability to control the risk associated with that.
This is a classic case study.
You’re making it as easy as possible for a customer to get their money back, but on the other hand it opens you up to risk.
Have they really returned it?
Is it in good shape?
Is it the original product they claimed it was?
All these other frauds we’re familiar with.
How do you build control into something where you’re trying to make it as convenient as possible?
We saw some videos of people scanning product but not putting it in the bin, and walking away with it.
That’s the balance: what controls do you need to minimise risk, but not make it too frictionful that it’s not worth it.
You can reduce your labour costs at the refund desk by getting the customer to do it for you.
Sounds familiar, doesn’t it? Sounds like self-checkout.
But by not having a member of staff overseeing this process, what is the risk of people exploiting it?
We heard examples of value being lost, but also how methods were being introduced to try and minimise risk.
It was an interesting session on competing dynamics within retail organisations: convenience and customer service versus controlling risk and loss.
Measuring loss and risk appetite for self-returns in retail
COLIN:
To your point, it’s that risk appetite you’ve always talked about.
What is your risk appetite?
It’s also a sense of capabilities you invest in behind, because for some retailers they don’t have the resources to invest in loss prevention capability that can detect, mitigate, control, and pick out the outliers that are abusing it.
You do have to invest in systems to support the frictionless journey.
I got the sense from the call that there’s going to be more of it going forward.
In online grocery, and even in apparel, I got the sense that self-returns is something we’ll look at again next year, and see more retailers doing it, having that risk appetite, and being happy to make that trade-off.
ADRIAN:
It comes back to how important it is to measure the loss.
If you know exactly what’s being lost through that process, then you can make clear business choices.
You could say we lose X, but every time a customer comes in, we get Y, and we can balance off those losses versus customer satisfaction scores.
You can take a more holistic sense and say we’re prepared to accept what could be, for instance, point point not two of loss for the amount of benefit it brings to our customers.
That’s the trade-off we always have: how much loss are you prepared to accept to enable you to deliver the business choices that you want?
Closing thoughts
COLIN:
Same with self-checkout, right? Productivity versus loss.
Absolutely.
Then you look out for the outliers.
Thank you, Adrian, for those thoughts and for a new word for our dictionary: frictionful.
Thank you very much and see you soon.
ADRIAN:
All right.
Cheers, Colin.
Bye-bye.
COLIN:
Cheers, Dan.
Bye.
Well, that’s all we have time for this week.
Thank you for joining us, and thanks to all the ECR Retail Loss community for the sharing of their knowledge, their research and latest learnings that assure that we become truly a global platform for learning.
My name is Colin Peacock.
This is the Sell More and Lose Less podcast.
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DAN:
Either way, see you next time.
Thank you again.
