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Returnalytics: Sustainability in Ecommerce Retail
About the Episode
The Returnalytics podcast discusses the latest retail trends, technology, and best practices for managing an ecommerce business and retail returns.
We have conversations with the best and the brightest in the online shopping ecosystem (ecommerce store owners, partners, and thought leaders) while we do our own digging to uncover the real truth behind running an ecommerce store.
Listen in as we uncover how retailers can manage and optimize their returns strategy, saving time, and labor, and ultimately increasing customer loyalty and lifetime value.
In this episode, we tackle a hot topic in ecommerce retail:
sustainability in ecommerce retail.
Why is retail sustainability becoming such a big problem? Where is the most waste being produced? What can retailers do to lower their carbon footprint? We get into all of that in this episode.
Listen to the full episode on Spotify or get the summary below.
About the Speakers
Travis Farey
Travis is a Product Marketing Specialist at ReturnLogic. Travis graduated from Shippensburg University with a Bachelor of Science in Supply Chain Management & Marketing. Travis has been working for ReturnLogic for over 2 years and started out as a Customer Support Specialist before working his way into Product Marketing.
David Gonzalez
David is a Senior Growth Manager at ReturnLogic, previously working as a Product Marketing Manager. David has prior startup experience formerly working at Drip and WhenIWork. He works closely with the Product, Sales, and Marketing teams at ReturnLogic to act as the voice of the customer and how to understand the ecommerce market.
Episode Transcription
Travis Farey – 0:00
Hi, I’m Travis Farey and this is the returns management podcast by ReturnLogic; a show where we connect ecommerce store owners together through casual discussion and examine current myths and trends to keep you up to date on everything happening in the ecommerce world.
In today’s episode, we’re discussing sustainability in ecommerce retail, the effect it has on retailers, and what retailers can do to fix this issue. My name is Travis Farey and I’m a product marketing specialist here at ReturnLogic. And today, I am joined by David Gonzalez, Senior Growth Marketer here at ReturnLogic. So without further ado let’s get this show started!
To begin today’s show, we’re first going to start by defining the scope of impact that returns have on sustainability in ecommerce retail and the planet.
David Gonzalez – 1:06
That’s right, Travis. So, the carbon footprint that returns leave is astronomical. In fact, I was reading in Retail Dive that in 2020 consumers returned over $428 billion worth of products, but only about 50% or half of those returned products making it back on the shelves. So that means half of that ended up in landfills.
Travis Farey – 1:30
Wow. Yeah. That’s really crazy to think about. I know as a consumer myself, if I’m gonna make an exchange, I’m assuming that product is going to be resold and not end up in a landfill. But as you just mentioned about 50% of returned products end up and landfills.
To actually build off what you just said, I read some research sales conducted by Optoro that stated that each year in the US, 5 billion pounds of returned goods end up in landfills. So if you take that percentage that you mentioned, 50%, and turn it into a number, it’s going to be around 5 billion pounds of those returned goods that actually will end up in landfills. And that’s also not to mention the 15 million metric tons of carbon dioxide that are also limited just in the transportation of returns.
David Gonzalez – 2:18
That carbon footprint that returns leaves is obviously a huge issue that needs to be addressed, not to mention just the cost of returns as well. So the cost of inspecting that good, repackaging it, getting it back on the shelf, the reverse logistics. All of that can even outweigh the value of the good from the return being sold a second time.
So consumers have environmental concerns about the way they shop, and environmental concerns about ecommerce. But they just don’t understand that linkage yet. But before we dive into that, Travis, why has this become such a big problem to begin with?
Travis Farey – 2:57
That’s a great question, David. I believe it comes down to a few things:
Number one is the explosive growth of ecommerce. We had this worldwide pandemic that shut down stores, shut down restaurants, you know, lock-ins were in effect, people were forced to stay inside. And so they logged onto their computers and started checking out some of these online stores and they quickly realized there’s a lot more options, there’s a lot more colors, sizes. And just in general, people realize that they like shopping online versus in brick and mortar stores like in the past.
And we know the ecommerce tends to have higher return rates just because of not being able to see the product, feel the product, try it on, things like that. And due to those, you know, returns that is caused by this explosive growth of ecommerce, that puts a strain on the environment.
And number two is how retailers handle returns. The rise of sales and the rise of using exchanges as a preference for retailers definitely has an impact on the environment. Exchanges definitely make sense for retaining revenue, increasing sales, etc. However, what we need to think about is that every time an exchange is made:
- An item has to get sent back
- A truck needs to pick that item up and deliver it back to the warehouse
- Then the warehouse team has to inspect it
- And decide what to do with it.
- And more often than not that product is gonna end up in a landfill.
Let’s actually look at Amazon for an example. Most packages that Amazon sends out are sent out in boxes. I know I’ve received them before, you probably have as well. It’s usually a brown box with their little Smiley logo on the side. The problem is that the shopper’s typical behavior is just to rip that box open and throw it away. And ultimately that box is going to end up in a landfill.
So now we have the original package that the shoppers ripping open and throwing away that’s wasted. When they want to return the item, they now have to find a new package and send it back to the warehouse, which when the warehouse team receives it is gonna open that package up, throw that box away, and possibly even discard the product as well. So that’s a lot of waste. Now, imagine this happening a million times a day.
David Gonzalez – 5:08
Exactly. And those are some great issues that you just discussed. Then the other point I want to highlight here is there is that disconnect with buyers, still. So like we were alluding to earlier, buyers don’t know any better. They don’t have the education on what actually happens when they return something. So, 90% of shoppers think returns get restocked immediately.
However, 25% of returns come back to the retailer and aren’t able to be restocked. So they end up in landfills, like we mentioned, furthermore, that 75% that isn’t thrown out isn’t just simply restock. So like we’ve been saying, it gets vetted, what condition is it in can it be restocked? Where should it be stocked? So you can see that it’s not profitable. So large retailers tend to just throw away goods because of the cost is lower than finding another sales or a cycling channel.
So obviously this can take a huge hit to retailers’ margins. But Travis why else should they care about this?
Travis Farey – 6:11
That’s another great question, David. I think the biggest reason is that this is our planet. We live on it and we need to take care of it. And we’ve seen in the past, what happens when we don’t take care of our planet. And our shoppers know that as well. In fact, consumer behavior is one of the biggest factors in deciding to become more sustainable for a lot of businesses.
I actually read an article by strategy-business.com that’s set in 2019:
- 35% of respondents said that they actually choose sustainable products to help protect the environment.
- 37% said that they looked for products with environmentally friendly packaging, and
- 41% said that they actually avoided the use of plastics whenever they could.
David Gonzalez – 6:58
Yeah. Wow. That’s a lot of stats wanting to keep them rolling?
Travis Farey – 7:03
Yeah, of course! Actually, according to those same findings:
- 78% of people are more likely to purchase a product that is clearly labeled as environmentally friendly.
- 75% of millennials are actually willing to pay more for an environmentally sustainable product
- 77% of Americans are concerned about the environmental impact of the products they buy.
- And 76% of Americans said that they would actually switch their preferred brand if they were offsetting carbon emissions.
David Gonzalez – 7:33
Those are some great stats, thank you. But it is a catch-22, right? So shoppers want sustainability, and retailers want to practice sustainability. But like we established, for every exchange, driver has to go pick up that package, get it back to the warehouse team, decide what to do with it…And with every exchange that happens, there’s more of an impact this has on the environment. So what can this lead to?
Unfortunately, it’s an effect called greenwashing. Greenwashing is when a company spends some more time and money on advertising the fact they’re environmentally friendly as opposed to actually offsetting their carbon footprint. So maybe the answer to this problem doesn’t lie in incentivizing more exchanges. Maybe the answer lies in data.
So some listeners aren’t gonna like to hear this, but 2/3 or 66% of the time, a return is a retailer’s fault. 23% of the time a shopper received the wrong item, 22% of the time the item wasn’t depicted correctly on the website, 20% of the time a shopper received a damaged item. And depending on which studies you read, some studies even show that eight out of the top 10 reasons for returning an item are completely controllable by the retailer.
Travis Farey – 8:56
So, quick question for you. David. If all these things are in the retailer’s control, then what can they do about it?
David Gonzalez – 9:02
Yeah, that’s a great question. And I think the person that answered this best is probably Michael Relich. So, he’s the co-CEO at Pacsun, and the way that he frames this is perfect. He said
“Everyone’s focused on ‘What were my sales yesterday?’ But nobody stops and says ‘What were my returns yesterday?'”
And the big reason why is because data is siloed throughout the organization. It’s not easy to go and actually pull all the data necessary to find out what’s driving returns. It’s very onerous. So it’s kinda like taking out the garbage. People tend to ignore it. So I love that quote. Perfect.
So like we highlighted earlier, between 66 to 80% of returned products are within the retailers’ control. So the first step for both retailers and shoppers is education. But, retailers need to know why returns are coming back so that they can be addressed. The shopper needs to be aware of the cost of their returned item, so they can make an informed decision on what they wanna do.
But, it’s not just return reasons alone. In general, ecommerce returns produce 15% more landfill waste than brick and mortar. Why? It’s simple. It’s inefficiencies and their reverse logistics. So what retailers can do is in addition to auditing their return reasons and returns data, they can look at the reverse logistics costs. And there are some new tools that returns management companies have come up with as well to help this issue.
Travis Farey – 10:31
Yeah, that’s a great call-out. There’s definitely tools out there and other ways that retailers can become more sustainable. The first one that comes to mind for me is eco-friendly packaging. Earlier we discussed the typical shopper behavior is to open up the package and then throw it away.
So, something like biodegradable bags can have a huge impact on the sustainability of a business.
That, and fitting more items into a single package. I mean, how many times have you ordered three or four items online and you received them on a separate day in a separate package? So being able to fit more items and then only shipping out one box can also have a huge impact.
I mean, there’s a lot of use cases for returns data. So, you can use returns data to improve your product descriptions, to taking a look at your returns data to see if a lot of shoppers are saying that the item didn’t look like the picture online, or the quality was depicted incorrectly.
Being able to set those expectations, improve those product descriptions, so that when your shopper receives that product, they know what they’re getting. Their expectations are set and they’re more happy with the product and less likely to return it.
Beyond that, there’s improving the actual quality of the products. So if you look back at your returns data and you can see that a lot of people are returning a specific shirt because it’s damaged. Well, maybe that has a quality issue. And every time it’s getting sent out when it shipped, it’s being ripped so that’s never gonna change unless we actually improve the quality of that product and make sure it’s not getting damaged in transit.
Then there’s improving your reverse logistics inefficiencies. So you can look back at your returns data to figure out if your 3PL or shipping carriers are taking too long to get your items back to the warehouse or taking too long to get the right item back to the shop. Or I think it’s super important to create workflows to get returns back as fast as possible. Because that actually improves the odds of them being able to be resold.
Then there’s things like AI routing. So instead of just randomly guessing wherever return goes, you can use AI to help figure out where the closest warehouse is or just where’s the best bet for someone to return an item. Something like printerless returns.
So to some extent overall less papers use with printerless returns. And consumers also have more eco-friendly cars which produce less emissions than trucks, when they actually take their items back to a drop-off location. And these are just some other tools or ways that you can become more sustainable. I imagine more will even pop up as this problem gets bigger and bigger.
David Gonzalez – 13:06
Unless returns management companies act and innovate now, the issue is going to continue to spiral out of control. Don’t be a greenwasher. Prove your processes, and become more environmentally friendly.
Walk the walk, don’t talk to talk.
Travis Farey – 13:26
Thanks for listening. Catch another episode, learn more at returnlogic.com, and find us on YouTube and I’ll see you back here on the returns management podcast.
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