Niranjan Gidwani is an independent Consultant Director and former CEO of Eros Group. He is also a board member at Society of Sustainability & Green Materials (SSGMUAE) and a member of the UAE Superbrands Council and HBR Advisory Council.
When one takes a closer look at a purchase process in the world of brick-and-mortar, one realises that there are many strong factors at play which operate at a sub-conscious level. In the case of a physical-format store, the average consumer must put in much more effort. The consumer must travel to the location, physically go through various items and maybe try out or even touch and feel some of them. Digital shopping, on the other hand, allows consumers to step into a similar virtual space at the click of a button and step out with another click. This requires little effort on the part of the shopper.
In the case of a digital transaction, there is no such human interface. Too many choices in the digital world could and many times do create confusion during decision-making.
The problem of bracketing
In recent times, particularly in the world of fashion and garments, shoppers have been displaying new behaviours. In a recent article written by Biju Dominic, Chief Evangelist, Fractal Analytics, an interesting phenomenon called ‘bracketing’ was suggested to be on the rise. “Bracketing” is a tendency of a consumer to buy multiple versions of a product, such as different sizes of a shirt, with the intent of sending back the ones they don’t want to keep. According to a study by Narvar, more than 58% of shoppers in the US resort to bracketing behavior. Another practice among a few shoppers is ‘wardrobing.’
That is, wearing an item of apparel once, maybe even for an event, and then returning it. According to industry reports, a whopping 16.5% of the goods sold in the US in 2022, valued at nearly $817 billion, have been returned. In 2019, the return rate was only 8%. As per data from Indian retailers, returns in the Indian online shopping market stand at around 25-40%. This high and increasing rate of returns is a serious problem for many online retailers.
According to a Wall Street Journal report, it costs a retailer $27 to handle the return of an online order worth $100. Many of the returned goods are not in a condition to be resold. Some of them get re-routed to charities. Much of the burden of this return behaviour is borne by the environment. In the US alone, 2.6 million tonnes of returned clothes wound up in landfills in 2020. Fashion is the third-most-polluting industry in the world after construction and food.
A double-edged retail strategy?
Making it easy for customers to return items at no cost started as a retail strategy to entice more people to shop online. But it’s getting expensive for retailers and irreversibly expensive for our planet.
High-priced electronics, such as laptops and tablets, have short product life cycles and lose value quickly, sometimes at a rate of almost 1% per fortnight. Seasonal items, such as back-to-school supplies or winter coats, become more difficult to resell if retailers get them back on shelves after demand has bottomed out.
The interesting part is that once the returned goods are back in the hands of a retailer, a fairly large portion may need to be sold below full price, according to Gartner Research. According to US consumers, the most returned items were clothing (26%), bags (19%), shoes (18%) and accessories (13%), consumer electronics (11%), and food and beverages (11%).
While returns are a big problem for retail, large number of online retailers do not quantify its full cost and an equally large number do not use some kind of technology or software to better manage it. In regard to packaging, while online shopping generates 4.8 times more packaging waste than brick-and-mortar stores, returned products often require extra plastic or cardboard that contribute more waste.
While all of us are very happy with the advent of e-commerce and online shopping, this planet of ours is surely going to face adverse consequences unless every part of the chain handles the returns process the right way. In this area, my assessment says, surely the start must be with the end consumer.
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Image source: Niranjan Gidwani
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