Retailers take steps to reduce environmental impact from returned goods

Retailers take steps to reduce environmental impact from returned goods

Staff Writer
Staff Writer
Pinduoduo Content Team
May 10, 2021

In this second part of our series looking at e-commerce and the environment, we take a look at how retailers are employing innovations to minimize returns. Click here for the first part of the series on how online shopping can be more green.

Online shopping took off when retailers made it easy for consumers to return merchandise that they found unsuitable, enabling them to overcome the hurdle of buying things sight unseen.

The industry’s generous returns policy is exacting a toll on the environment. When items are bought in a traditional bricks and mortar store, research shows that about 8-10% of them will be returned. When the same items are ordered online, that returns rate triples in some cases to between 20-30%. For clothing, that rises as high as 46.5% as consumers purposely over-order on sizes, styles and colors to try on at home, knowing that they can return for free in many cases.  

What the industry calls “reverse logistics” — sending the product from buyer back to the seller — incurs energy use and pollution from the transportation, according to Joel Rampoldt, a managing director at retail practice AlixPartners. Many of the returned goods end up as waste because the costs of shipping, inspecting, repackaging and marketing often exceed what the merchandiser can make on a second sale.

“Many shoppers send a product back believing it will be sold to someone else — but in fact their returns may well end up in a landfill,” he said.  “Retailers are in a tough spot. They know that their customers are increasingly saying, ‘we take your environmental record into account when choosing where to buy.’”
“At the same time, easy returns have become a baseline shopper expectation,” he adds. “Retailers who try to reduce environmental impact by increasing the friction in returns risk immediate loss of business.”  

According to Optoro, a company that works with retailers to streamline returns, transporting returned inventory round the US creates over 15 million metric tons of carbon dioxide emissions annually. That’s more than the emissions of three million cars.  

The good news is that there are steps being taken — both by consumers and also companies — to help put a stop to excessive returns.

Virtual changing rooms: A new raft of augmented reality (AR) and virtual reality (VR) driven technology is being developed that promises to recreate the changing room experience for the online shopper. At Israeli startup Zeekit, for instance, its founders applied the same radar intelligence used to map out unknown terrain for the army, to map out the way in which clothes rise and fall across the contours of the body.  

The result is an artificial intelligence (AI) tool that can scan any 2D image of a garment and “map” it across a 2D image of a shopper’s figure to give a hyper-realistic representation of how you’ll look. The company is working with top clothing retailers like ASOS to create a virtual changing room.

Re-commerce: With an estimated $350 billion of returned goods, re-commerce is the contemporary approach to secondhand goods. Re-commerce retailers are growing 20 times faster than general retail, according to Coresight Research, with some estimates this secondhand sales channel will reach $51 billion by 2025.  

Some companies like Poshmark and Depop act a little like a fashion-centric eBay, connecting sellers with buyers. Others, like thredUP, buy up secondhand stock from retailers and act like an online thrift store, while at the luxury end is the likes of TheRealReal, a consignment shop that authenticates high-end items for resale with a slick website and app that works just like any standard online retailer.  

Major retailers are also taking up re-commerce. In October 2020, Ikea announced it would buy back and resell customer’s unwanted furniture as part of its plans to become “a fully circular and climate-positive business.”  

Streamlined returns: Like physical retail, e-commerce will always have to deal with some level of returns. Many retailers are streamlining supply chains to minimize the damage to the planet.  

For example, the quicker that returns can be collected, checked and readied for resale, the less of a retailer’s margin is eroded, and the more likely they will bother to get the item back on their (virtual) shelf. That’s why many retailers are turning to sophisticated AI tools to help streamline this whole process — some even using bots to process returns and cut out the cost of extra labor.

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