Flexible returns policy: the last retail battleground?
The growth of the ecommerce sector has changed what it means to be a business in the UK today. A recent IMRG Capgemini report estimates that 27% of retail sales now take place online - that’s almost a third of consumer purchases, and a figure that crystallises the shift in how companies and shoppers interact. Moreover, online platforms’ domination of the retail sector is only set to become more pronounced.
British retailers have been in the vanguard in recognising that a positive customer experience online is built upon a backbone of flexible and reliable fulfilment options. And as customer expectations of convenience have grown, and the digital retail environment has become more competitive this has become more important. Today, customers are not just buying a product, they are investing in an experience that complements their lifestyle.
Results from our recent study into the European delivery and returns market revealed that the stakes are higher than ever in the three key ecommerce markets of the UK, France and Germany. Leading retailers now offer an average of 3.3 delivery options, and a further 40% offer four or more.
But, of course, delivery is just one side of the fulfilment coin. In many cases, it’s returning an item that is the all-important final point of contact between business and consumer.
An overlooked battleground
Despite the obvious rewards of getting returns right, our study shows that retailers are often underestimating their power. In short, the retail market may innovate rapidly when it comes to delivery, but returns remain an overlooked opportunity.
At the moment, the European returns landscape looks relatively disjointed. Encouragingly, just 16% of retailers surveyed still offer a solitary return option - but there’s also noticeable variation between retailer and customer funded returns. 42% of retailers, for example, expect their customers to foot the bill for their postal returns.
It’s here that businesses are missing a trick. A flexible, reliable and customer friendly returns policy is a fundamental part of building customer loyalty. Much in the same way that flexibility is key in delivery options, returns offerings must meet consumer expectations of an experience that can be adapted to their convenience. Naturally, however, they must be implemented in a way that makes commercial sense.
Perfecting your returns policy
We may be approaching the busiest time in the retail calendar but businesses shouldn’t lose sight of the post-Christmas returns season. Focusing solely on the festive delivery rush may cause them to trip up come January if their returns policy isn’t up to scratch. And the return of unwanted Christmas gifts may be the first time some shoppers interact with a business.
Retailers may be tempted to pass the cost of returns on to customers to minimise their financial impact. But returns should be treated as an inevitable cost of doing business in ecommerce, because charging for them will damage brand perception or put customers off ordering in the first place.
It’s crucial that businesses absorb returns costs into their bottom line if they are to appeal to customers and compete with other players in the market.
Find the cost balance
At a minimum, retailers need to offer a free-of-charge return option: either a traditional postal option, or a flexible alternative for outside of work hours, such as in-store or collection locker returns.
Of course there are compromises to be made on costs. The frequent use of courier collection methods currently seen may be practical for the consumer, but they are extremely expensive for the retailer. Ideally, this option should only offered for bigger items, and retailers should look into local partnerships rather than larger, and more expensive, global courier companies.
These local alternatives can provide far better value, especially when combined with consolidated in-country options.
Capitalise on in-store returns
Returns also offer retailers a chance to encourage customers into bricks and mortar stores and close the gap between their digital and physical offerings. But our research showed that only 59% of the biggest ecommerce retailers offered an in-store return option.
This is a surprisingly low number when one considers the benefits. As well as avoiding additional posting costs, retailers can capitalise on incremental footfall to convert refunds into exchanges - particularly valuable for fashion retailers, who experience high return rates due to sizing issues. After all, if retailers need to absorb the cost of returns as part of their business model, they may as well use them to benefit their bottom line in any way possible.
Think global, act local
For retailers ready to take the next step in their strategy by expanding abroad, the old adage “think global, act local” remains as true as ever.
We found that there is a high degree of localisation in each of the three markets we studied when it comes to alternative return options, and cross-border retailers hoping to cash in on a chunk of the customer’s wallet will need to tailor their offers to align with local customers’ expectations. In Germany, for example, the vast majority of retailers offer returns through DHL PackStation and Hermes Paketshop’s networks – make sure your options match up to what’s available.
Although returns are often seen in a negative light, they remain an unavoidable cost of doing business. Instead of treating them as a begrudging after-thought, we urge retailers to turn a strong returns policy into a competitive advantage. As the last potential touch point, it could determine whether a customer comes back for more.
Radial recently released their European eCommerce Delivery & Returns Index 2016. The survey of 100 leading online and multichannel retailers selling in the UK, France and Germany will help you understand customer expectations in each market when it comes to delivery and returns. The report is available to download here.
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NTT DATA Services, Remodelling Supply Chains for Resilience
Joey Dean, the man with the coolest name ever and Managing Director in the healthcare consulting practice for NTT DATA and is focused on delivering workplace transformation and enabling the future workforce for healthcare providers. Dean also leads client innovation programs to enhance service delivery and business outcomes for clients.
The pandemic has shifted priorities and created opportunities to do things differently, and companies are now looking to build more resilient supply chains, none needed more urgently than those within the healthcare system. Dean shares with us how he feels they can get there.
A Multi-Vendor Sourcing Approach
“Healthcare systems cannot afford delays in the supply chain when there are lives at stake. Healthcare procurement teams are looking at multi-vendor sourcing strategies, stockpiling more inventory, and ways to use data and AI to have a predictive view into the future and drive greater efficiency.
“The priority should be to shore up procurement channels and re-evaluate inventory management norms, i.e. stockpiling for assurance. Health systems should take the opportunity to renegotiate with their current vendors and broaden the supplier channel. Through those efforts, work with suppliers that have greater geographic diversity and transparency around manufacturing data, process, and continuity plans,” says Dean.
But here ensues the never-ending battle of domestic vs global supply chains. As I see it, domestic sourcing limits the high-risk exposure related to offshore sourcing— Canada’s issue with importing the vaccine is a good example of that. So, of course, I had to ask, for lifesaving products, is building domestic capabilities an option that is being considered?
“Domestic supply chains are sparse or have a high dependence on overseas centres for parts and raw materials. There are measures being discussed from a legislative perspective to drive more domestic sourcing, and there will need to be a concerted effort by Western countries through a mix of investments and financial incentives,” Dean explains.
Wielding Big Tech for Better Outcomes
So, that’s a long way off. In the meantime, leveraging technology is another way to mitigate the risks that lie within global supply chains while decreasing costs and improving quality. Dean expands on the potential of blockchain and AI in the industry.
“Blockchain is particularly interesting in creating more transparency and visibility across all supply chain activities. Organisations can create a decentralised record of all transactions to track assets from production to delivery or use by end-user. This increased supply chain transparency provides more visibility to both buyers and suppliers to resolve disputes and build more trusting relationships. Another benefit is that the validation of data is more efficient to prioritise time on the delivery of goods and services to reduce cost and improve quality.
“Artificial Intelligence and Machine Learning (AI/ML) is another area where there’s incredible value in processing massive amounts of data to aggregate and normalise the data to produce proactive recommendations on actions to improve the speed and cost-efficiency of the supply chain.”
Evolving Procurement Models
From asking more of suppliers to beefing up stocks, Dean believes procurement models should be remodelled to favour resilience, mitigate risk and ensure the needs of the customer are kept in view.
“The bottom line is that healthcare systems are expecting more from their suppliers. While transactional approaches focused solely on price and transactions have been the norm, collaborative relationships, where the buyer and supplier establish mutual objectives and outcomes, drives a trusting and transparent relationship. Healthcare systems are also looking to multi-vendor strategies to mitigate risk, so it is imperative for suppliers to stand out and embrace evolving procurement models.
“Healthcare systems are looking at partners that can establish domestic centres for supplies to mitigate the risks of having ‘all of their eggs’ in overseas locations. Suppliers should look to perform a strategic evaluation review that includes a distribution network analysis and distribution footprint review to understand cost, service, flexibility, and risks. Included in that strategy should be a “voice of the customer” assessment to understand current pain points and needs of customers.”
“Healthcare supply chain leaders are re-evaluating the Just In Time (JIT) model with supplies delivered on a regular basis. The approach does not require an investment in infrastructure but leaves organisations open to risk of disruption. Having domestic centres and warehousing from suppliers gives healthcare systems the ability to have inventory on hand without having to invest in their own infrastructure. Also, in the spirit of transparency, having predictive views into inventory levels can help enable better decision making from both sides.”
But, again, I had to ask, what about the risks and associated costs that come with higher inventory levels, such as expired product if there isn’t fast enough turnover, tying up cash flow, warehousing and inventory management costs?
“In the current supply chain environment, it is advisable for buyers to carry an in-house inventory on a just-in-time basis, while suppliers take a just-in-case approach, preserving capacity for surges, retaining safety stock, and building rapid replenishment channels for restock. But the risk of expired product is very real. This could be curbed with better data intelligence and improved technology that could forecast surges and predictively automate future supply needs. In this way, ordering would be more data-driven and rationalised to align with anticipated surges. Further adoption of data and intelligence and will be crucial for modernised buying in the new normal.
These are tough tasks, so I asked Dean to speak to some of the challenges. Luckily, he’s a patient guy with a lot to say.
On managing stakeholders and ensuring alignment on priorities and objectives, Dean says, “In order for managing stakeholders to stay aligned on priorities, they’ll need more transparency and collaborative win-win business relationships in which both healthcare systems and medical device manufacturers are equally committed to each other’s success. On the healthcare side, they need to understand where parts and products are manufactured to perform more predictive data and analytics for forecasting and planning efforts. And the manufacturers should offer more data transparency which will result in better planning and forecasting to navigate the ebbs and flows and enable better decision-making by healthcare systems.
Due to the sensitive nature of the information being requested, the effort to increase visibility is typically met with a lot of reluctance and push back. Dean essentially puts the onus back on suppliers to get with the times. “Traditionally, the relationships between buyers and suppliers are transactional, based only on the transaction between the two parties: what is the supplier providing, at what cost, and for what length of time. The relationship begins and ends there. The tide is shifting, and buyers expect more from their suppliers, especially given what the pandemic exposed around the fragility of the supply chain. The suppliers that get ahead of this will not only reap the benefits of improved relationships, but they will be able to take action on insights derived from greater visibility to manage risks more effectively.”
He offers a final tip. “A first step in enabling a supply chain data exchange is to make sure partners and buyers are aware of the conditions throughout the supply chain based on real-time data to enable predictive views into delays and disruptions. With well understand data sets, both parties can respond more effectively and work together when disruptions occur.”
As for where supply chain is heading, Dean says, “Moving forward, we’ll continue to see a shift toward Robotic Process Automation (RPA), Artificial Intelligence (AI), and advanced analytics to optimise the supply chain. The pandemic, as it has done in many other industries, will accelerate the move to digital, with the benefits of improving efficiency, visibility, and error rate. AI can consume enormous amounts of data to drive real-time pattern detection and mitigate risk from global disruptive events.”