Product returns in the UK were estimated to generate about 750,000 tonnes of CO2 emissions in 2022, out of which 350,000 tonnes came from reverse logistics processes.
- There was also a significant amount of waste generated, as fashion returns that could not be resold, reused or recycled may have been sent to landfill or incinerated, according to a report on the circular fashion ecosystem project of the British Fashion Council (BFC).
- The findings are from the report Solving fashion’s product returns: How to keep value in a closed-loop system, released by the BFC's Institute of Positive Fashion (IPF).
The Highlights and the Lows: The report is a treasure trove of information on how the returns system works in the UK:
- The fashion industry was a key contributor to the overall number of online returns in the UK in 2022, with clothing, shoes, followed by bags and accessories being the top 3 categories for online returns.
- The online channel saw a significantly higher rate of returns compared to bricks-and-mortar, with return rates at about 30% and 10% in 2020 respectively.
- Although offering free returns has been a way for retailers and brands to drive sales, dealing with returns is ultimately a costly business, and was estimated to cost the UK fashion industry at least £7 billion in 2022.
- While some companies may be more efficient at reducing the cost of returns processing, it costs a retailer approximately 55% to 75% of a product’s retail price to process each online return.
- Typically, the greatest loss of value occurs due to markdowns: around 50% of all returns get discounted at about 40% of the original retail price. Hence, retailers may even lose money by offering returns on products that already deliver low margin, or it may be more profitable to destroy low-margin products rather than process them.
The Environmental Costs: What is most concerning about returns, especially in the longer-term, is its significant environmental impact.
- About 750,000 tonnes of CO2 was emitted by returns handling in the UK in 2022, including transport, warehousing, repackaging, and disposal. Transportation was the biggest contributor, as it accounted for almost 50% of total CO2 emissions.
- This level of emissions was also on the rise due to the race for even shorter online delivery times (e.g., next day or same day delivery), as next day or same day delivery implies smaller parcel sizes and more frequent delivery journeys.
- At worst, the emissions per trip for a one delivery trip was 35 times greater than that of a trip for a fully loaded van.
- Other drivers of emissions and waste included the energy required to wash and iron returned items in the warehouse, and excessive returns packaging i.e., single-use plastic packaging and cardboard made available for consumers to pack and return items.
- While most fashion items can be resold after complex processing, approximately 3% of returns will remain unsold.
It was estimated that more than 50% of those returns that cannot be resold are sent to landfill and another 25% are incinerated, with only the remaining 25% being recycled.
- The level of waste implied that the industry is producing an unnecessarily high volume of clothing items, which coupled with an average CO2 footprint of 19.5 tn per tonne of clothing for its whole lifetime, suggests a significant amount of emissions and environmental damage.
- 36% of Millennials and 32% of Generation Z were high intensity returners;
- 39% of high intensity online shoppers returned womenswear, making it the most returned product category;
- Incorrect sizing or fit (93%) and product quality not meeting expectations (81%) were the top returns reasons;
- Detailed product descriptions (75%) and size calculators (72%) were voted as the most helpful solutions;
- 56% of online shoppers selected a returns charge as the measure most likely to prevent returns;
- 74% of Millennials and 64% of Generation Z are willing to share their data for digital avatars.
- Reducing the environmental impact of fashion returns is a priority. All stakeholders agreed that finding ways to track and reduce their environmental footprint is a priority, due to the increased pressure coming from government, consumers, and an overall sense of social responsibility.
- Handling returns is highly complex and financially costly. Many retailers and logistics stakeholders discussed that part of the reason that fashion returns have a detrimental impact on both the environment and a fashion business’s financials was because returns are very complex to handle, hence incurring costs and eroding margin.
- Product lifecycles should be extended. Brands and retailers noted that one significant way the fashion industry can reduce the environmental impacts of returns is to find ways to extend the product lifecycle. This not only has environmental benefits, but also gave retailers a way to engage with customers even post-sale.
- Fashion businesses need to rethink their strategies and have a unified approach on returns. In the long-term, however, brands know that there needs to be greater alignment within fashion organisations on their strategy on how to balance revenues and the cost of returns.
- Consumer expectations will need to shift. On the flipside, brands and retailers have also identified that one of the key challenges to overcome in the long-term is around consumer expectations of returns.
- Need for end-to-end transparency. In order to align consumers and retailers on the need to act on the issue of returns, and to enable a response that is most effective, all stakeholders agreed on the need for improved transparency on the topic.
- Leverage technological innovation and automation. Given that some of the biggest concerns all participants had around returns revolved around their current cost and future mitigation, many participants, including logistics operators, retailers and brands, were positive about the use of technology and automation to address these issues.