The global pandemic accelerated the retail industry’s digital transformation overnight. For retailers across the globe and in Australia, this means the shift to e-commerce dramatically accelerated. In fact, Australians spent a record $50 billion on online shopping last year, and e-commerce accounted for 16.3 percent of the total retail spend.
Unsurprisingly, the retailers who performed better during the pandemic were those who had a head-start in online and state-of-the-art digital capabilities. Many retailers, despite their size and segment, have had to pedal hard to catch up. What became earlier on is that only through digital optimisation would retailers get a competitive edge to survive the impact of pandemic and on and off restricted lockdowns.
The acceleration towards a digital-first approach in retail, however, is a double-edged sword. As sales soared, so too did the returns’ culture: consumers buying online, knowing they are likely to send some goods back. This has become an increasingly pressing matter for most retailers. The Australiasian Circular Textile Association estimates that 30 percent of all online sales in Australia are returned.
A top priority for every online retail organisation is offering customers the flexibility they expect from returns policies, and at the same time preventing damaging financial losses. Businesses are turning to data in motion technology to help navigate this process seamlessly.
Returns hit retailers three-fold
In an industry where margins are increasingly under pressure from rising costs, competitive pricing and the need to optimise the digital experience, returns hit retailers in three ways:
- Firstly, returns raise the cost of fulfilment and logistics across the supply-chain. A return often entails a 100 percent refund to customers and the shipping costs double, as the items sometimes need to be picked up by courier, resulting in a direct net operating loss.
- Secondly, lots of critical data supporting the supply-chain, logistics and the buying and returns process could be scattered across many different platforms. This includes point-of-sale (POS), e-commerce platforms, enterprise resource planning and supply chain and logistics interfaces. To add to the complexity, legacy systems may run in on-premises data centres while customer-facing apps and interfaces may reside in the cloud. Some retailers are still managing returns through spreadsheets. As retailers strive to improve their customer experience, they must focus on improving the overall returns process.
- Thirdly, returns impact reported revenue – and are such a problem, they now feature in most retailers’ annual reports as a key audit statistic. Retailers must make provisions for returns in their financial statements, which can account for around 2-3 percent of revenue. As returns are increasing year-on-year, current provisions are proving inadequate and are likely to have to increase.
The rising shopping returns challenge
So, what can retailers do in this new culture of online shopping returns? Just as investments in digital helped during the pandemic, so too can they help address this problem.
A data in motion platform helps retailers streamline the returns process by ensuring all the data sources across the value chain are directly speaking to one another, and that every time a returns process is triggered, it is then shared in real-time. The technology is the instant link between all of a retailer’s footprints, from e-commerce tools such as content management systems, supply chain and logistics technology and in-store technology.
Connecting these disparate data sources is beneficial on three fronts:
- By simplifying the data integration across different systems – from production to POS, and beyond – the retailer is able to track the delivered item, the returns request online and the courier company pick-up to receivables at the warehouse. They might even track new data sources, such as the social media sentiment analysis once the return and refund has been processed. This significantly reduces data integration complexity and allows the retailer not only to build the best experience for the customer, but also drive efficiency and reduce costs.
- A data in motion platform provides a real-time accurate view of stock, as it is returned to the warehouse and potentially re-offered for sale. This helps the retailers update their inventory, in real-time, maximising on warehouse space and the supply of high-demand items.
- Finally, implementing an event streaming platform, retailers can provide the foundations for running a modern business. The traditional spaghetti mess of data integration across legacy systems can be replaced with a modern ‘central nervous system’. This makes it easier for retailers to build a real-time business. The retailer can get more specific insight into their financial position, based on real-time events during the returns process.
A new way of thinking
The pandemic has only accelerated what we already knew: customer behaviours are evolving and online shopping is accelerating rapidly. To keep up and meet heightened consumer demands, it is important that retailers address the returns problem – and fast.
This requires a fresh way of thinking about connecting data sources across the business, which is why a growing number of retailers are taking advantage of data in motion platforms. Put simply, this should be a critical component of every retailer’s technology stack.
Lyndon Hedderly is director customer solutions at Confluent.