The cost of returns in the UK

Feb 7, 2024

The cost of returns in 3PL and eCommerce: Navigating challenges and embracing automation systems

 

Returns have become an everyday challenge for online retailers in the modern world. And whilst great for consumers, offering great customer service like a returns policy, particularly a free one, poses significant challenges for both 3PL providers and online retailers. The financial implications extend beyond the immediate return process, impacting operational efficiency, customer satisfaction, and, ultimately, the bottom line. In our latest blog we discuss the real cost of returns in the 3PL and e-commerce sectors. We also shed light on how automation emerges as a strategic ally in mitigating these costs and elevating overall business efficiency.

 

Typical returns process

Although returns are dealt with differently from business to business the general process typically involves:

  • Acknowledgment of return received – Giving assurance to the consumer the process is ongoing
  • Removal from packaging
  • Quality checking
  • Assigning to customer account to initiate refund or replacement
  • Repackaging
  • Returning to stock 
Powered roller conveyor

The impact of returns

  1. Direct costs:

Such as transportation, restocking, and potential refurbishment or disposal of returned items and packaging.

 

  1. Lost revenue and stock depreciation:

Returned items often cannot be resold at full price, leading to revenue loss.

 

  1. Operational expenses:

The handling of returns requires additional labour, storage space, and resources.

 

  1. Customer retention costs:

Dissatisfied customers resulting from a challenging return experience can translate into additional expenses for customer retention efforts.

 

  1. Intangible costs:

Negative reviews, damage to brand reputation, and potential impacts on customer loyalty.

Team repairing roller

What challenges do eCommerce and 3PL businesses face?

Since the pandemic in 2019 / 2020 the trend of online shopping has dramatically increased, as November 2023 nearly 31% of all retail sales are made online. It’s interesting to note that more than half of UK consumers say they spend more online now than they did before the pandemic in 2020. 

 

56% of people in the UK are hesitant to buy if there’s no free-of-charge return policy

This change in habits and with retailers now offering free returns has posed a number of logistical challenges for retailers. Offering free returns on most items is now commonplace in the retail world and consumers are becoming accustomed to this service offering, even stating that they would avoid using a retailer if free returns are not offered.

Retailers now have to deal with up to 1 in 3 items being returned to them which means they have to deal with complex transport and logistical issues in dealing with the returned items.

This obviously has a cost to the retailer with research (CBRE) showing that the average cost of a returned item is £20 when considering shipping, warehousing, repackaging and restocking items ready to ship again. 

 

Team repairing roller

 

What can retailers do with all of these returns? 

Some retailers choose to cut their losses with returns, in particular when the volume of returns is so high, and their manual systems can’t deal with them all. Some retailers will sell their returns at a discounted price to liquidators who in turn manage the process of repackaging and selling on, typically via online platforms.

Conveyor Systems Ltd can help mitigate some of the challenges of warehousing, repacking and restocking of items through the implementation of bespoke conveyor systems and automation to assist in the handling of the returned items. With the right systems in place this once challenging process could be easily integrated into the process of an ecommerce business and avoid costly and time-consuming manual handling issues.

 

How can automation help? 

CSL’s automation solutions have empowered 3PL providers and e-commerce giants to handle returns with unprecedented efficiency. By integrating automated sortation and processing systems, CSL clients have witnessed significant reductions in operational costs associated with returns.

We will work with you to assess your current procedures and advise on the right systems to put in place to improve efficiencies.  We can also support your business as it grows to keep up with increasing demand for years to come. And with Conveyor Care from CSL we can help maintain your systems and keep them running at peak efficiency so there are no unexpected or unpleasant surprises. Find out more about the technology that can help here

Major players in the e-commerce and 3PL sectors have embraced automation to optimise returns management. By leveraging advanced technologies, they have not only reduced costs but also enhanced their reputation for customer service excellence.

 To find out more about how Conveyor Systems Ltd can help your business deal with returns contact us on 01283 55 22 55 or email sales@conveyorsystemsltd.co.uk/

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