The Best Return is No Return

Image: Martin Bernetti/AFP

The CEO’s Agenda, like a moveable feast, is renewed every year. Themes and priorities may change, but sustainability, whatever the industry, remains at the top of the list.

An agenda in its own right, sustainability begins with making a commitment to incorporating social, environmental, and governance (ESG) goals into an organization’s strategic decision-making.

The skepticism that first greeted the incorporation of sustainability into the core of one’s business strategy would appear to no longer hold sway. An alliance of investors, consumers, industry peers, and governments has driven this change in sustainability mindset in the c-suite.

Whatever the motivation – extreme weather conditions, environmental degradation, global income inequality – sustainability, in an environmental, social, and ethical sense, is now a management imperative. The corporate focus is shifting toward achieving tangible long-term viability alongside organizational return on investment.¹

Sustainability and the fashion industry

Quantifying the financial impact of a failure to address sustainability at a corporate level will always be controversial. Credible estimates envisage a decline in EBIT margins of more than 3 percent by 2030 if fashion brands continue along a linear – take, make and waste trajectory. This adds up to approximately €45 billion per year of profit reduction for the industry as a whole.²

Business as usual is therefore not an option.

Beyond financial measures there is no shortage of data illustrating the impact the fashion industry has upon the environment.

To highlight but a few of the data points, it is estimated that: 

◆ 4%³ of global greenhouse gas emissions can be attributed to the fashion industry due to its long supply chains and energy-intensive production.⁴

◆ 20% of industrial water pollution globally is attributable to the dyeing and treatment of textiles.⁶

◆ 35% of the microplastics found in oceans can be traced to textiles, making them the largest source of microplastic pollution in the world’s oceans.⁸

◆ 87% of material used for clothing production is landfilled or incinerated after its final use.⁹

Yet the reluctance to act remains. The complexity of the challenge is clearly overwhelming. Disagreement amongst the various role players as to the nature, timing and extent of the challenge merely delays the move forward beyond expressions of commitment to action.

A past Governor of California, Arnold Schwarzenegger, summed it up best when speaking about global warming at the United Nations World Environment Day conference in San Francisco in 2005:¹⁰

“I say the debate is over. We know the science, we see the threat, and the time for action is now.”

Renew the focus upon returns management

No matter the size, and wherever located in the fashion industry value chain it is incumbent upon all stakeholders to identify opportunities within their sphere of influence and to lead the required change.

Technology leaders in the size and fit recommendation space have a significant role to play in retail operations, specifically returns management. Again, there is a wealth of data illustrating the extent of the challenge in the returns space:

◆ 26% of ecommerce returns in the US were clothing items, compared to an average 18% across all ecommerce returns.¹¹

◆ 70% of consumers say incorrect fit is the primary reason they return clothing.¹²

◆ 25% of items returned to fashion retailers end up in landfills annually.¹³

A recent report¹⁴ authored by McKinsey & Company in partnership with Global Fashion Agenda identified the minimization of returns as one of a number of potential decarbonization levers available to the fashion industry to reduce the industry’s greenhouse gas emissions.

Technology leaders in the size and fit recommendation space are therefore well positioned to make a significant contribution to the estimated saving of 12 million tonnes of greenhouse gas emissions that could be achieved through a combination of technological improvements on predicting size and fit, and consumer behavioral change to reduce purchases with an intent to return.

To put the challenge in perspective, the 2015 Paris Agreement¹⁵ on climate change calls for holding eventual warming “well below” 2 degrees celsius, and for the pursuit of efforts to limit the increase even further, to 1.5 degrees. The year 2030 is the target date. 

For the fashion industry to carry its share of the load under its current growth and emissions savings trajectory, it will be required to deliver total savings of 1.6 billion tonnes of greenhouse gas emissions by 2030, confining its emissions to 1.1 billion tonnes.

Best practices for mitigating returns

Returns are inevitable, especially in clothing and footwear. Where size and fit is concerned there is no silver bullet that will eliminate returns in their entirety. A component of any strategy targeting apparel returns emanating from an ecommerce platform will include the adoption of an appropriate size and fit technology in combination with the best practices suggested below:

• Product descriptions – At a minimum, sizing information shared on product detail pages should include multiple points of measurement, instructions on how to measure each point, and sizing guidance covering individual brands where multiple brands are stocked.¹⁶
  
• Videos and images – Visual content sets expectations. Research found average consumers want to see between 3 to 5 images of a product to better understand what the item has to offer before making a purchase.¹⁷
  
• Let shoppers ask questions – 55% of shoppers abandon an online purchase if they can’t find a quick answer to their product question.¹⁸ Whether call center support or FAQs, customers must be able to find answers to the questions they have easily.
  
• Customer reviews – Today, 97% of consumers consult product reviews when making purchase decisions, up from 95% in 2014.¹⁹ Encourage shoppers to submit photos and videos as part of their reviews. Allowing reviewers to submit their own photos adds a level of authenticity and allows future shoppers to see what a product looks like “in real life.”
  
• Education – Highlighting the environmental impact behind returns reminds customers that reducing returns isn’t just about cutting costs, but also about protecting the environment and reducing waste for future generations.

Chief Returns Officer

Global ecommerce retail sales are forecast to reach an estimated USD$5.5 trillion in 2022, growing by a further 35% to USD$7.4 trillion in 2025.²⁰ US online retail industry sales for 2021 amounted to  USD$1.050 trillion, while the value of merchandise returned is estimated to be USD$218 billion, a staggering 20.8% of sales.²¹

Yet it is surprising to see that managing returns is not among the top five priorities for a third of retailers, with more than a quarter of the retailers surveyed of the opinion that they don’t manage returns efficiently and effectively. 

 A USD$218 billion problem accounting for 20.8% of online sales deserves a focus all of its own, a seat in the c-suite. 

Returns affect multiple departments across the value chain with each department assuming responsibility only for their own role in the returns process. In the absence of assigning responsibility at a senior level, the response to the returns challenge will at best remain fragmented and inefficient.²²

There is clearly a case to be made for the Chief Returns Officer, a senior leader tasked with end-to-end responsibility for both processing as well as reducing the volume of returns. In the fashion industry where online retailers can expect anywhere between 8 – 40% return rates²³,  a dedicated returns executive is becoming an imperative.

Time to revise the CEO’s agenda

Whatever the motivation – sustainability in its widest sense, climate change and global warming, or a focus upon cost and profitability – the top of the CEO’s agenda in the fashion industry requires immediate revision. 

The deployment of size and fit technology in tandem with the return mitigation strategies identified above, represents an opportunity that can best be described as low hanging fruit. An effective solution, easily implemented, and one which delivers value way beyond its cost of implementation and maintenance.

In the words of John Holdren, former president of the American Association for the Advancement of Science and an energy and climate expert:

“We basically have three choices: mitigation, adaptation, and suffering. We’re going to do some of each. The question is what the mix is going to be. The more mitigation we do, the less adaptation will be required and the less suffering there will be.”²⁴

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¹ Eitelwein, O., & Parquet, S. (2021, January). Why sustainability has become a corporate imperative. Retrieved from https://www.ey.com/en_mz/strategy/why-sustainability-has-become-a-corporate-imperative

² Global Fashion Agenda & Boston Consulting Group. (2017). Pulse of the fashion industry. Retrieved from https://www.greylockglass.com/wp-content/uploads/2021/08/Pulse-of-the-Fashion-Industry_2017.pdf

³ Fashion on Climate. (2020). Retrieved from http://www2.globalfashionagenda.com/INITIATIVES/FASHION-ON-CLIMATE/#/

⁴ Everything You Wanted to Know About the Fashion Charter. (2022, May). Retrieved from https://unfccc.int/blog/everything-you-wanted-to-know-about-the-fashion-charter

⁵ Kant, R. (2012). Textile dyeing industry an environmental hazard. Natural Science, 04(01), 22–26. https://doi.org/10.4236/ns.2012.41004

⁶ Ellen MacArthur Foundation. (2017). A new textiles economy: Redesigning fashion’s future. Author. Retrieved from http://www.ellenmacarthurfoundation.org/publication

⁷ Julien Boucher & Damien Friot. (2017). Primary Microplastics in the Oceans: a Global Evaluation of Sources. dx.doi.org/10.2305/IUCN.CH.2017.01.en. IUCN, Gland, Switzerland. Retrieved from https://portals.iucn.org/library/sites/library/files/documents/2017-002-En.pdf

⁸ Dottle, R., & Gu, J. (2022, February). The Global Glut of Clothing Is an Environmental Crisis. Retrieved from https://www.bloomberg.com/graphics/2022-fashion-industry-environmental-impact/

⁹ Global Fashion Agenda & Boston Consulting Group. (2017). Pulse of the fashion industry. Retrieved from https://www.greylockglass.com/wp-content/uploads/2021/08/Pulse-of-the-Fashion-Industry_2017.pdf

¹⁰ Bustillo, M. (2005, June 2). Gov. Vows Attack on Global Warming. Retrieved from https://https://www.latimes.com/archives/la-xpm-2005-jun-02-me-greenhouse2-story.html

¹¹ 25 Surprising Ecommerce Return Statistics (2022). (2022, August 26). Retrieved from https://www.soocial.com/ecommerce-return-statistics/

¹² Consumer Survey: Returns in Retail in 2021. (2022, March 9). Retrieved from https://www.powerreviews.com/insights/consumer-survey-retail-returns-2021/

¹³ Reagan, C. (2019, January 12). That sweater you don’t like is a trillion-dollar problem for retailers. These companies want to fix it. Retrieved from https://www.cnbc.com/2019/01/10/growing-online-sales-means-more-returns-and-trash-for-landfills.html

¹⁴ Berg, A., Granskog, A., Lee, L., & Magnus, K. (2020, December 14). Fashion on climate. Retrieved from https://www.mckinsey.com/industries/retail/our-insights/fashion-on-climate

¹⁵ The Paris Agreement. (n.d.). Retrieved from https://unfccc.int/process-and-meetings/the-paris-agreement/the-paris-agreement

¹⁶ Lohmann, H. (2021, November). 6 Common Retail Return Reasons (And Why You Should Care). Retrieved from https://corp.narvar.com/blog/common-reasons-for-retail-returns

¹⁷ York, A. (2019, March 23). 7 Ways to Limit Product Returns for Good & Keep Your Customers Happy. Retrieved from https://www.powerreviews.com/blog/product-returns/

¹⁸ Leggett, K. (2017, July 10). The Time Is Now To Invest In Knowledge Management. Retrieved from https://www.forrester.com/blogs/15-10-02-the_time_is_now_to_invest_in_knowledge_management/

¹⁹ The Growing Power of Reviews: Understanding Consumer Purchase Behaviors. (2020, October 16). Retrieved from https://www.powerreviews.com/insights/growing-power-of-reviews/

₂₀ Bernhardt, G. (2022, April 26). Global Ecommerce Sales Growth Report for 2020-2025. Retrieved from https://www.shopify.com/za/blog/global-ecommerce-sales

²¹ Consumer Returns in the Retail Industry 2021. (2022, January). National Retail Federation. Retrieved from https://cdn.nrf.com/sites/default/files/2022-01/Customer%20Returns%20in%20the%20Retail%20Industry%202021.pdf

²² Ader, J., Adhi, P., Chai, J., Singer, M., Touse, S., & Yankelevich, H. (2021, May 25). Returning to order: Improving returns management for apparel companies. Retrieved from https://www.mckinsey.com/industries/retail/our-insights/returning-to-order-improving-returns-management-for-apparel-companies

²³ Fashion Retailers: Environmental and Business Sustainability Are Possible. (2020, January). Retrieved from https://www.newmine.com/blog/4-steps-to-make-your-company-more-sustainable

²⁴ Kanter, J., & Revkin, A. C. (2007, January 30). World Scientists Near Consensus on Warming. The New York Times. Retrieved from https://www.nytimes.com