A new report by retail inventory management software company Brightpearl has found that retailers face a ‘returns tsunami’ as the try-before-you-buy trend intensifies.
The scheme, which allows customers to order multiple items before deciding what to keep with no upfront cost, has a major impact on both purchase behaviour and returns.
Using data from 200 retailers and 4,000 consumers in the US and UK, Brightpearl’s report found the scheme has been adopted by 17% of global retailers, and this is predicted to increase to more than a quarter by 2019.
More than a half of retailers (51%) agreed that their margins are being squeezed by returns, and 72% believes they will be squeezed even further as the try-before-you-buy trend intensifies.
While retailers claim processing returns is complex, 69% are not planning to deploy technological solutions to process them, with the average returned purchase item passing through seven people before it is listed for a resale.
Brightpearl’s chief executive officer Derek O’Carroll said: “This trend could spell disaster for retail business owners if they do not prepare by having the right framework and solutions in place to manage returns.
“They’ll need to do so quickly as the trend becomes more widely adopted over the next year. Consumers will buy more, but retailers must be ready for a potential flood of returns. With shoppers indicating that they could return an extra three items a month on average, it could spell an unmanageable tsunami of returns for some merchants.”
The study reveals that in addition to free returns, shoppers expect their returns to be processed faster. The majority of all age groups believe that a time frame of three to five days is acceptable to receive reimbursement on returning items.
Cocorose director Gareth Austin Jones said: “When you consider all handling, transport, admin and possible repacking, the costs of returning an item into your supply chain could be double that of delivering it
“For retailers to capitalise on try-before-you-buy without cannibalising margins, they must have the right systems in place to optimise the returns process and ensure end-to-end visibility over factors such as available cash flow and inventory in the system – all of which could cause major pain points.”
O’Carroll said: “For consumers, try-before-you-buy is a positive trend, removing another barrier to purchase. The good news for retailers is that this will almost certainly lead to an uplift in sales.
“Our study indicates that shoppers want the option to order items such as clothes online but only pay once they decide to keep them, so it’s something that all retailers will need to consider to remain competitive.”
The research found that 76% of consumers would ‘definitely’ or ‘maybe’ purchase more items if offered a try-before-you-buy option. Shoppers would also order an average of three extra items each month with intention of returning them.
According to the survey, 87% shoppers would return up to seven purchases, and 85% would expect retailers to provide free returns.