The ease of online shopping coupled with generous return policies have yielded a fresh bout of post-holiday blues for the apparel industry. Fueled in part by limitations on physical stores imposed by the pandemic and viewed against the backdrop of the accelerating sustainability movement, the crisis has become epic in scope — an industry-wide embarrassment and a devastating blow to bottom lines.
Something’s gotta give when it comes to return policies with retailers and brands.
A recent survey by the National Retail Federation (NRF) and retail-solutions vendor Appriss Retail found that the estimated value of all merchandise returned by consumers last year soared by about 75% to nearly three-quarters of a trillion dollars.
That’s a hit of about 15 cents of every dollar in 2021 retail sales.
As in prior years, ecommerce was hit hardest, contributing about a third of the total. Of last year’s $1 trillion in online merchandise sales, the NRF reported more than 20% were returned.
That’s a staggering expense when you add in the cost of shipping, processing, storing and — especially in the case of apparel — the likely destruction or disposal of items that cannot be restocked. AND, IT IS NOT SUSTAINABLE.
The causes of runaway returns include wardrobing, the practice in which consumers order three or more of particular item in different colors, then returning all but one.
A more common problem the industry is grappling with is sizing. One company’s medium may be another’s small.
Shopify, a leading e-commerce platform for online stores, reported last year that the dominant reason consumers give for returning an item is size: 30% said too small; 22% said too large.
My own experience this past Christmas is a case in point. My son wanted to gift me a pair of slippers from a well-known brand. The first pair were so narrow I was unable to get them on, so back they went. The second pair was better but still too tight for my wide feet. The third pair fit.
Footwear is more likely to be re-stockable than a shirt. Shoes tried on in a physical store go back on the shelf. Even so, the company that sold the slippers incurred expenses that had to have made the final sale barely profitable, if at all.
Although consumers have until now taken liberal return policies for granted, surveys consistently find that a majority are paying close attention to how brands deal with such issues across the enterprise.
Returns are at least an annoyance for consumers and undermine brand loyalty. At worst, retailers that get caught destroying returned or unsold goods earn a black eye: the public reacts with appropriate outrage and brand equity gets taken down a notch or two.
Digital tools for addressing the sizing issue are beginning to be rolled out within the industry including, for example, artificial intelligence applications that allow customers to scan themselves with their phones for more accurate measurements. More vigorous consumer testing and research can help brands cut down on purchases that disappoint for other reasons, such as color and style.
Returns are a major sustainability headache for the fashion industry, but retailers are only just beginning to face them head on.
In reporting the NRF survey results, Appriss CEO Steve Prebble warned, “Retailers must rethink returns as a key part of their business strategy.”
Investors are paying even closer attention to such issues as portfolio managers have begun to routinely apply rigorous Environmental, Social, and Governance (ESG) standards to the criteria for “green” investments.
Retailers have no choice but to deal with waste and unsustainable practices in all forms. Let’s start to address it now.
