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Digital return flows save millions - and the environment too

Online shopping sites provide a modern and interactive shopping experience - until the customer wants to return the goods. The return process is still slow and analogue, which is costly both financially and environmentally. With a digitised return flow, we can reduce both costs and the environmental impact. Find out more about the Vinnova-funded project, which is based on customer behavior research.

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Returns from e-commerce account for high sums of merchants lost revenue. In some industries, especially the fashion and clothing industry, the return rate is as high as 40-70 percent.

Peter Hietala has worked with systems for digital commerce for over 25 years.

- In principle, the return handling has looked the same since 1992, regardless of how modern and interactive the shopping experience is otherwise. A return slip is automatically sent with the delivery. If the item does not fit, the customer should fill in a paper, go to a parcel representative, send back - and then have to wait 1-2 weeks to get a new item or the money back. That patience does not have today's consumers.

The test rooms have moved home.

- Anyone who buys a garment to have for the weekend party and gets it delivered on Tuesday but discovers that the size doesn't fit, can't wait that long. The customer goes elsewhere and the merchant has lost a deal - and in the worst case, lost a customer.

Through a call for proposals focused on innovation projects in retail tech, Peter Hietala's Easycom company has been granted SEK 1.7 million in support to develop a digital solution that visualizes and optimizes e-commerce return flows, a process that was previously analogous and that generates high negative environmental impact and large revenue losses. With their solution 'DISKO' (Digitalt InformationsSystem for Communication and Optimization) the return handling is simply woven into the customer's existing systems and processes.

In the example above, the customer can immediately see what sizes and colors are in stock, click in whichever they want and have it delivered the next day. Only when the new item has arrived does they need to send back the first delivery.

- It will be a kind of express exchange service. Research shows that 10-30 percent of the business is otherwise lost due to the slow return handling.

Goods are shipped unnecessarily

For the merchant there also arises a practical problem in handling the returned goods. The product is sent back to a warehouse that can be very far from the customer, and only then is it decided what to do with it. If the item is damaged or defective, it is usually discarded.

- In addition to being an incredible waste of resources, transport to the warehouse or depot is in many cases unnecessary. Instead, we can direct the returns to go directly to where they are going. Take, for example, a clothing company that sells online all over the world and has stores in several locations in Europe. A customer in Portugal buys a garment but wants to return. Instead of sending the garment to a warehouse or depot in the Netherlands - often through two or three other countries - we can direct the return directly to the nearest store in Portugal. The item comes to the store quickly and can be sold again. It saves time, money, transportation and the environment and also makes the refund to the customer faster.

If the product is damaged, the process can be paused at the consumer with so-called "gate keeping". The consumer submits a picture of the damaged item digitally, customer service looks at it and announces whether the customer should return the item or send it directly for recycling. The consumer receives a refund or a new item sent to him.

When Vinnova came out with a offer of funding for retail tech and solutions that brought the digital transformation forward, Easycom was quick to apply.

The test room has moved home

- We had a clear idea and were thinking about how we could further develop the product. Thanks to the support, we were able to speed up development and launch our solution earlier. It is a product that is really needed. E-commerce loses huge sums with today's return handling. Att Vinnova addresses and chooses to invest in this also shows that the area is important. Digital commerce is growing rapidly and in the wake of the death of the store and the corona pandemic is predicted to increase even more. I think companies that do not understand the importance of keeping up with the digital transformation will find it difficult to manage.

The simplicity of digital shopping has changed the behavior of consumers. The test room has moved from the store to the home. Convenient for the customer but often unprofitable for the merchants.

- A customer who buys three pairs of shoes will surely return two of them. And the two pairs become locked in the sales process. After all, they cannot be sold to anyone else as long as they are with the "wrong" customer or on their way back. With the express exchange service (Disko), the consumer receives a message even before they arrive at the checkout. “We see that you usually have size 37. To save on the environment we send one to you. If it doesn't fit, you get a new size the day after. " And most consumers understand if you explain that it's better for the environment, and for the customer.

Solutions based in research

Research and understanding of how customers actually behave is a big part of the solution. When Peter Hieatala founded the company in 2017, it was after several years of talks with Klas Hjort at Lunds Universitet, who researched consumer behavior and returns. Close research collaboration has been an important part, especially in the work of reaching out to new customers. The project development included close cooperation with both e-commerce companies (the clothing chain Cellbes) and transport logistics companies (Postnord) in order to understand partly the customer needs and exactly what the limitations of today's system are. Based on these discussions, the solution was adapted to function as a seamless interface between the digital business's various business systems, the transport logistics companies' production systems and the IT system supplier.

Peter says that the focus is on making digital commerce more profitable. The secret is simply to keep track of which customers and items are profitable or not.

- Whoever the retailer thinks is a fantastic customer can in fact be directly unprofitable. A customer can shop for SEK 20,000 today but return for SEK 19,500 tomorrow. They nevertheless become a VIP customer directly because the e-commerce tools are so blunt and usually only take into account sales. In practice, this means a loss-making business for the trader.

- We do a profitability analysis of the customers at the retail level. It also detects so-called phantom customers, customers who trade 2-12 products per year and return just about everything. Here it becomes clear to the companies exactly how large sums that an un optimized return handling actually costs.

An entirely digital flow also enhances the overall shopping experience for the consumer.

- The customer journey does not end at checkout. The customer may have had a great digital experience throughout the buying process - then to sit and fill out a paper to return or exchange an item. It fits in nicely with the modern impression that e-commerce wants to convey. Even in the return - perhaps even in particular - there are customer values to nurture and develop to increase profitability.

Last updated 28 May 2020

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