Substantial environmental impact from returned goods
E-commerce is increasing rapidly. But so is the number of returned goods – around three billion return packages per year within the EU alone. The environmental impact of these transactions is substantial, and so is the energy use. Nonetheless, there has been almost no research done on the subject. Until now.
Sharon Cullinane, professor of sustainable logistics, and Michael Browne, professor of logistics and urban freight transport, is coming to the end of a two-year project financed by the Swedish Energy Agency studying the energy use and environmental impact from returns in the online clothing sector.
“We selected the fashion industry because of the high number of returns, many of them cross-border. The average rate of returns in Sweden turned out to be 22 percent, but the range is large, varying from 18 percent to 60 percent depending on the segment. For example, young people return more clothes than older people, and women more than men, and high fashion items are returned more than basic fashion” says Sharon Cullinane.
A new pattern in consumer behaviour has become discernible with the advent of e-commerce: customers tend to systematically over-order. To find the right size or perfect colour, they order many more items than they intend to keep, returning all but one or two.
“This is very much an information problem,” says Sharon Cullinane. “Customers have to take a leap of faith when shopping online. It’s hard to imagine what the clothes would look like on yourself, colours may not be exactly as they are in life, and sizes can vary a lot between brands. Shoes are especially problematic. I should add, however, that fraudulent behaviour in the customer is not unusual. They might order an item, wear it once to a party, and then send it back. Some even try to return fakes instead of the originals.”
The return “culture”, if you will, is in other words becoming the norm, despite the cost for the environment. The returns need to be checked, processed and repacked before becoming available for another sale. The items often travel great distances, and take a long time to re-enter the market. Some larger companies have dedicated warehouses dealing with returns; others, smaller, are often sub-contracting the return processing to countries like Poland or Estonia – or even countries in Asia to reduce labour and other costs.
“One of the reasons that returns are so popular with customers is that the process itself is a ‘big black box’ – people don’t know what the return entails, the cost is hidden. Consumers tend to think about the benefits, not the consequences of their behaviour. It’s hard for people to imagine that their items travel for maybe thousands of kilometres before going back to sale. But I would like to add that you can’t really blame the companies for sending their goods abroad to be processed cheaply. Margins in the online fashion industry are usually tiny, and they’re looking to reduce costs as much as possible. However, they don’t tell this to customers.”
E-commerce companies generally do not explain the return process in detail; the reason being that the most prolific returners also tend to be the best customers.
“No company wants to be the first to explain the true cost of returns to their customers, since they’re afraid they may lose market shares to their competitors. If customers are required to help to cover the actual cost, companies believe they’ll simply switch brands instead.”
Thus, e-commerce companies uphold a conspiracy of silence. Legislation may not be the answer to the problem, either. Until recently, countries like Germany and Finland had laws stating that returns had to be free of charge for consumers. But even after these laws changed, almost no-one dares to charge for returned goods.
“So it’s hard to see what governments can do to influence consumer behaviour. Maybe carbon labeling and taxation, but those have their own inherent difficulties,” says Sharon Cullinane.
In her research, she has focused on finding ways to reduce energy use and lessen environmental damage resulting from transports. She’s identified three actors that need to work on this.
“First of all, customers need to understand how much returns affect the environment and behave more responsibly. Secondly, retailers can do a number of things to handle returns more efficiently. They also have a responsibility to not encourage consumers to return items. Thirdly, carriers have to both improve their efficiency and switch to warehouses and transports with less impact on the environment.”
There are some digital tools in the works to help customers make better choices while shopping. One example is digital dressing rooms, where you can see how the products would look on a model of yourself. One Japanese company will even send you a dotted formfitting suit that coupled with an app sends your measurements to the web shop, ensuring a tailored fit. Sharon Cullinane also mentions intelligent shopping systems that will suggest better personalized offerings based on previous purchases and returns.
“Another interesting solution is linked to the growing trend of sharing economy. Returns might be sent directly to another customer. This, naturally, requires a lot of trust on the part of the consumer, but if they could see the benefit to the environment some may opt to do that.”
But in the long run, Sharon Cullinane thinks it is inevitable that we have to start to cover the true cost of returns.
“We’re all guilty of wanting to buy things as cheaply as possible. It’s natural, isn’t it? But we must be ready to pay a bit more for products in the future.”
About Sharon Cullinane, professor of sustainable logistics
“I did my PhD on heavy lorries in the UK in 1987. I researched passenger transports at the University of Oxford. Then I went to Egypt and set up a transport university for three years. I was researching logistics in France for a year, then I was five years in Hong Kong studying freight and passenger logistics, and after that I spent three years studying e-commerce in Edinburgh. And now I’ve been here in Gothenburg for three tears. In the future, I’m thinking of looking at e-commerce and returns in rural areas, most researchers are focusing on city commerce and logistics.”