20CENT MEETS Oliver Lauterwein from BuyBay
June 5th is internationally known as World Environment Day. A day with which the UN tries to encourage worldwide awareness and action to protect our environment. Hence, the ideal moment to take a look at the sustainability momentum in the business space and more specifically at the returns process and how that can help brands and companies become more sustainable. So in this instalment of 20/CENT Meets I took the opportunity to chat with Oliver Lauterwein, Chief Commercial Officer at BuyBay. We talked about sustainable initiatives in retail, and more particularly the importance of a good return policy for retailers.
Let's start with an annoying question: whether online or offline, do retailers like returns?
“Despite the increased ease of purchasing for consumers, returns are an unpopular topic and definitely one that (on- and offline) retailers are not keen to deal with. Not in the least because they are often seen as having a negative impact on the environment. However, with the explosive growth of eCommerce platforms in recent years, a solid returns process can be one of the most effective ways in which brands can differentiate themselves from the competition when it comes to sustainability and fostering more durable customer relationships.”
Obviously, retailers are interested in opportunities to reduce costs, but why should they pay even more attention to sustainability?
“Research shows sustainability has reached a tipping point in people‘s shopping behavior. As awareness of global environmental issues increases, it changes the habits of consumers: 66% of consumers in a recent CapGemini study across nine different countries, choose to purchase products or services based on their “environmental friendliness.1Consumers increasingly embrace social causes and seek products and brands that align with their values. Nearly six in 10 consumers are willing to change their shopping habits to reduce environmental impact. Nearly eight in 10 respondents indicate sustainability is important for them. And for those who say it is very/extremely important, over 70 percent would pay a premium of 35 percent, on average, for brands that are sustainable and environmentally responsible. 2
We see a similar evolution on the retail side with brands around the world increasing their focus on sustainability. Since 2014, global sustainable and environmentally responsible investment is up 68 percent and now tops almost EURO 25 trillion. 3”
In practical terms, what can businesses do to commit to sustainability and the environment?
“While companies going green was in the past often met with scepticism and accusations of greenwashing, there is now a strong movement of tangible and provable efforts companies make to be more environmentally friendly – this goes from using sustainable energy for production, to environmentally friendly use of resources or optimizing logistic processes. A very visible movement is the one towards the re-use and resales of returned or used products.
The increasing number of consumers actively searching for used products, b-stock, re-furbished and re-sold items is clearly illustrated by a recent IBM research about the rise of the “circular economy,” which offers alternative ways to attain products: seven out of ten consumers in that research indicated they have tried or would like to try purchasing pre-owned, repaired, or renewed products and 84 percent of those who have tried them plan to continue to do so. The popularity of the circular economy is even more apparent among Gen Z and Millennials with nearly eight in ten indicating they have purchased or want to purchase pre-owned products.4”
So, smarter returns management is obviously useful?
“As part of consumers’ increasing focus on sustainability, they are turning to new purchasing and consumption models that are disrupting many traditional brands and creating opportunities for new entrants like new platforms selling everything from refurbished consumer electronics, mobile devices, household goods, furnishings etc.
But, these new consumer preferences also offer great potential for businesses to differentiate themselves from the competition by being more sustainable by for example optimizing their processes for returns, overstock and b-stock.
Using your own store or web-shop for selling returned products offers customers an attractive alternative. They can purchase goods that are almost as good as new as well as products with - transparently documented - minor defects or signs of use, at attractive prices. This will not only be appealing to consumers looking for a cost-effective alternative but also to those looking to be more environmentally friendly and hence will perhaps be a reason for those customers to choose a web-shop or brand offering this option over others.
The above-described trend has already established itself in the clothing market. You don’t have to look far to find examples in the media of fashion industry giants launching initiatives to recycle or even resell used clothing in their own online shops. In 2024 the secondhand fashion market is expected to globally hit a revenue of EURO 41 million.5 A recent study by research agency iVox in Belgium confirms the orientation towards the purchase of more secondary goods: 40% of the respondents participating in this research indicated they had bought a secondary good in the past year.6”
Are returns more typical for the fashion sector or do you see this phenomenon in other segments as well?
“This sustainability trend is now also becoming increasingly evident in other product segments such as electronics, household appliances, furniture and toys. Suppliers, especially well-known brands, are often concerned that they are cannibalizing their offer and image if they also make so-called B-goods available to their customers. However, our experience in working with well-known suppliers has shown that the range of returned goods in particular opens up exciting new customer groups for them who are convinced by the good price-performance ratio or the sustainability concept.”
For many companies, managing returns may not be simple. In your opinion, is it better for retail to work on outsourcing the logistics for returns?
“A lot of companies currently leave their return management to logistics provider. This sounds like an efficient solution but from a sustainability and even a cost efficiency point of view that is often not the case. Logistic providers often sell returns to bulk buyers unsorted, on mixed pallet and as “C-goods” at i.e. the end of the quarter or half-year. When looking at reselling products and hence benefiting the circular economy, however, it makes more sense to look at the individual steps of returns management and to check which areas can be optimized in-house or tackled together with a qualified partner in order to realize a better value retention. “
Finally, could you shed some light on the different steps to make returns management more efficient?
“Sure! For a good management of returns, companies should include the following steps:
- Capturing and documenting expected and incoming returns.
- Refund to the customer
- Inspection and evaluation (grading) of returned items based on pre-determined criteria
- Refurbishment of damaged goods that are financially profitable to be refurbished
- Documentation of defective goods and allocation of suitable resale channels
- Disposal or recycling of irreparable items
- Re-packaging of returned items
- Re-booking of items into inventory
- Resale and shipping
- Customer service and support services
Given the complexity of managing returns and second chance products, we advise looking at what can be done in-house - for example by using appropriate software solutions - and what needs to be done in collaboration with an appropriate partner. In summary: Through better management of returned and used products, companies can not only increase their profits, but also offer products at a good price.”
- CapGemini – How sustainability is fundamentally changing consumer preferences
- Meet the 2020 consumers driving change
- Henisz, Witold, Tim Koller, and Robin Nuttall. “Five ways ESG creates value.” McKinsey Quarterly. November 2019. https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/ our-insights/five-ways-that-esg-creates-value
- Meet the 2020 consumers driving change
- ThredUp – 2020 Resale Report
- iVox – grootschalig tweedehandsonderzoek