RFID and the Returns Epidemic
The retail industry is currently facing an epidemic. In the past, commentators weighed in on trends such as the death of the high street, how to obtain and retain brand loyalty and how to improve the customer experience. However, while the industry was debating these issues, another challenge began emerging: a challenge that could be costing retailers significant profits—the returns epidemic.
According to a report by the Financial Times, the average returned product passes through seven pairs of hands before it arrives back to a store. In the United Kingdom alone, it is estimated that returned items are costing retailers an average of £60 billion ($80 billion) a year.
It could be argued that the reason retailers are witnessing greater returns is down to changing consumer behavior. The article in the Financial Times suggests that a large number of consumers are hedge-spending, whereby they are buying items at full price with the knowledge that they can return them with ease if they are discounted at a later date.
Another argument for the noticeable increase in returns could simply be down to how straightforward retailers have made the process for customers. A recent survey by Barclaycard found that 30 percent of British shoppers admitted to over-ordering clothes with no intention of keeping items, yet 47 percent of those surveyed also said they would not over-order items if they had to pay to return them.
So how are product returns impacting retailers so significantly? The main factor influencing profits so much is that these products are becoming held up in processing through the supply chain. Companies around the world are struggling to manage volume of returns effectively. By the time a product arrives back in store and is put back on the shelf, the process has been so slow that the item is often out of season or no longer being sold in store, which means retailers either have to sell the product at a discounted price or send it back to the supplier. This leaves retailers in a position to reconsider their reverse supply chain in order to overcome this challenge.