For many, the Boxing Day sales are a festive tradition, but last week major retailers from Next to John Lewis announced that their stores would stay closed as they expected customers to do their bargain hunting online.
For those who regret their internet purchases – or those who unwrapped yet another hideous Christmas jumper – the prospect of a trip to the post office to send their returns awaits.
Online shopping returns is big business: they are forecast to exceed £27bn in the UK alone this year, according to international logistics company ZigZag Global. More than a fifth of all online non-food purchases are now returned, and more than half of clothing purchases are sent back.
Customers complain about the hassle, and many retailers now charge them to do it after some reported the sheer volume of items being returned had dented their profit margins. Once the items arrive, some of them are simply binned.
But now the returns industry – also called reverse logistics – is finally finding ways to reduce waste and even turn a profit.
Some companies are trying so-called returnless refunds, in which customers can just hang on to their unwanted goods, while logistics companies which offer innovative solutions are looking for ways to make a profit by improving the process. Companies which originally focused on repair and clothing rentals are finding new profits in preparing returns for resale. This coincides with a growing consumer appetite for secondhand and resale clothing.
Reverse logistics are more arduous than shipping goods out. Returns are often sent overseas in shipping containers to storage warehouses. Goods also have to undergo quality control to check they can go back on sale, which is expensive.
“There is no such thing as a free return,” said Al Gerrie, CEO of ZigZag Global, which has a returns platform and global carrier network. “The logistical processes involved – inspecting, repackaging and redistributing items – costs retailers a lot. It is why major retailers like Boohoo, Zara and Asos have introduced charges to recoup some of those associated costs. I expect more retailers to follow suit into 2025 and beyond.”
He added: “We are now in one of the busiest periods in the calendar: Black Friday through to the January sales. To remain profitable, it is crucial that retailers address the returns problem.”
There are environmental consequences. Dr Talia Hussain of the Institute for Design Innovation at Loughborough University London said: “Returns put extra vehicles on the road, causing traffic and emissions. Most packaging is probably not being reused, and if the cost of servicing the return and restocking is greater than the potential profit, companies may choose to liquidate or dispose of items.”
Companies now working to transform the returns process for the better include ACS (Advanced Clothing Solutions) in Scotland, which started back in the 1990s renting out kilts and Highland formal dress. Since 2019, they’ve diversified into repairing and reselling returns for high-street brands. This year, ACS partnered with the tech company Archive, which sorts secondhand clothing for designer brands, sending them for resale or recycling. Archive’s software can meet a clothing company’s unique specifications on which clothes qualify for resale. Brands including North Face and Pangaia are running their own resale channels for secondhand clothes through the ACS/Archive partnership.
American returns company (Re)vive is a startup which repairs returned clothes within three weeks to be resold at full price or through resale websites. The company is already in profit – more than $3m this year, with expectations that the volume of clothes renovated will increase 25 times next year. (Re)vive started as Hemster, an alterations company, and pivoted to processing returns for resale after running into difficulties during the pandemic.
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Allison Lee, CEO, said: “Before I started (Re)vive, I just assumed that everything I returned would automatically go back into stock, be sold to someone else, and everyone would go on their merry way. Turns out the return processing journey is a lot more complicated than I could have imagined as a consumer. Even a very minor imperfection can contribute to the item getting ‘damaged out’ for the season, which is a lose-lose situation for brands and consumers. We hope to leverage (Re)vive so these imperfect items can live a second life.”
Lee said brands need to work harder to make returns sustainable. “The recent sustainability movement has been focused on consumer behaviour, the narrative being ‘Shop better’, which helped grow awareness around resale and circularity. However, it’s important to also ask brands … to make sure their returns are not unnecessarily or prematurely going into landfill. This is sustainable and financially viable.”
Gerrie said the speed of a returns process can have a major impact on waste. “For most retailers, the speed with which returns can be processed is critical,” he said. “Especially in fashion, trends move fast, and items sitting in warehouses lose value quickly, so it’s imperative that goods can be graded and put back into the market efficiently. Additionally, 84% of consumers expect to be refunded within a week, and these standards don’t drop during peak season.”
A recent Zigzag report on reverse logistics found that slow and serial returners account for almost half of returns in the UK, while 69% of gen Z shoppers indulge in “bracketing” – ordering the same items in different sizes and colours – compared to 16% of baby boomers. Gerrie expects a seasonal spike in returns from “wardrobing” over Christmas and New Year, when customers buy party outfits to return after wearing them.
“Growth in returns rates has a massive impact on retailers’ profitability,” he said. “The extent of this has been understated by retailers for years, but some are now waking up to the pressure free returns put on business.”
