19 Apr From the end of the line to the circular economy – the sustainable handling of returns in logistics
Borgholzhausen, April 19, 2021 – The boom in online trading continues – not least due to the corona pandemic. Both online shop operators and logistics service providers notice this. Consumers enjoy the convenient way of ordering online, especially when it comes to clothing, electronics, household appliances and books. This also applies to product categories such as groceries or drugstore items. DHL alone, with a market volume of almost 50 percent, reports over 1.6 billion parcels in 2020. According to the Federal Association of Courier Express Post Services eV, the entire CEP industry could already have 4.43 billion parcels by 2023.
Of these shipments, an estimated 280 million packages and around 490 million items are returned each year for various reasons. The rate fluctuates depending on the product category. Front runner: clothing that does not fit or was ordered in several sizes as a precaution. The fact that every sixth package and every eighth item ordered makes its way back to the manufacturer causes high postage and transport costs, and the loss in value of the returned goods also has an impact.
In addition to the costs, there are also the environmental pollution caused by the increased delivery traffic and the flood of packaging materials, which is why online trading is criticized as ecologically problematic, also in view of the high proportion of returns. 240,000 tons of CO2 are emitted every year by returns, according to the figures from a study by the Returns Management research group at the University of Bamberg. In addition, the destruction of returned goods – around 20 million items every year – removes valuable resources from the cycle. The federal government would like to counter this with its draft law to avoid the destruction of returns, which was passed in February of last year.
Economic and ecological challenge
Sustainability in returns management concerns online retailers and logistics service providers in two ways – economical and ecological. On the one hand, backward flows of goods must not stand in the way of sustainable economic activity. Specifically, this means: They have to be handled as economically and efficiently as possible. Because processing operations such as viewing, checking, collecting, processing or even repairing the returned items are cost drivers.
Efficient returns management can help here. On the one hand, time can be saved by the fact that staff specially trained in e-commerce already carry out a classification when it is received, i.e. when it is returned to the warehouse, and the identification of the respective item after receipt of the return. On the other hand, the correct classification into A, B and C goods helps to further process the returned products. If an article is marked as A-Ware, it is in excellent condition and can be put back on the market without any further steps. According to the annual return speedometer of the Bamberg Research Group Returns Management, this part of the article even makes up around 79 percent of all returned products. For articles classified as B-goods, the packaging must be renewed or the article cleaned. In addition, the goods are marked as a return for the consumer. In the case of C-goods, reprocessing is not economically viable, which is why these articles are sent to secondary markets or used for raw material extraction. Articles only rarely have to be completely disposed of – according to the Bamberg research group, this affects 3.9 percent of returns.
Returns as a resource killer? It doesn’t have to be!
The classification is not only used to identify the economic value of a commodity. It also helps to make the handling of returns more sustainable, especially from an ecological point of view – the second side of the coin in returns management. If A-goods are fed back into the cycle of goods, B-goods are carefully processed and even C-goods are still useful, that helps to save resources. This also applies to transport packaging, some of which can also be returned to the cycle through recycling.
Optimize and minimize transport
In addition, with regard to sustainability, the transports that are absolutely necessary for returns must also be considered: These are not only a cost factor, but also a challenge for the environment. The lower the emissions the vehicle, the cheaper the transport. On the one hand, companies and logistics service providers can convert their fleets to more modern trucks with fewer pollutant emissions and keep them technically up-to-date. Drivers should also be trained in a fuel-efficient driving style. Both of these not only save money, but also help to make transports as sustainable as possible. On the other hand, it is important to optimize the transport routes – for example, using software for route planning that calculates the shortest route from the parcel shop via various intermediate stations such as hubs back to the warehouse. For short distances – for example from the parcel shop to intermediate storage in the city, electric vehicles also help to reduce emissions. In order to avoid unnecessarily long distances, attention should also be paid to a decentralized location structure spread across Germany. Returns can usually be processed at the logistics location that is best suited for resale.
The best way for more sustainability
Online shop operators and logistics service providers are not only reactive towards returns. Together you can also actively prevent returns: with preventive returns management. For this, it is important to identify the reasons for returns first. To do this, shop operators and logisticians need data that they can find out in dialogue with customers – for example via return slips or online queries. Information can then be generated from this data, on the basis of which product descriptions can be adapted. In this way, consumers know exactly what they are ordering. Virtual try-ons in the online shop with the help of stored body scans are becoming more and more a trend – especially in the fashion sector. Customers can only order the trousers they want in the size that really fits, instead of the previous three different sizes. In addition to optimizing online shops through virtual reality and other digital options, there are also very simple ways to ensure that the goods arrive at the consumer undamaged, for example secure shipping packaging. This also prevents returns. The collection of costs for returns is also a topic of constant discussion. That is a critical point. Customers often expect a free return option and can easily switch to another provider who allows them to do so. In the last step, only an obligation for return fees would help. So that it doesn’t have to come to that, shop operators always have the option of appealing to their customers’ ecological understanding: Education about the consequences of a return when ordering can make consumers aware of the need to carefully consider the choice of product.