E-commerce companies are finding it more cost effective to dispose of returned items instead of reselling them. A study by researchers at Lund University in Sweden examined the textile and electronics industries to gain insight into a growing problem that has received little attention.
With the rise of online shopping, returns are becoming more common and studies have shown that digital commerce generates a higher number of returns than in-store purchases. According to industry data, the trend of returning items is on the rise, likely due to the fact that shipping returns are often free.
This results in increased fossil-fuel emissions from transportation, and additionally, many companies, even those that promote sustainability, often discard returned products. According to estimates, the total value of discarded textile and electronic products in the EU could reach a staggering EUR 21.74 billion in 2022. Some experts believe the actual cost could be even higher.
Throw-away culture
“The blunt reality is that throwing things away is the lesser of two evils for the company, from a financial perspective. That applies particularly to goods that are cheap compared to the cost of examining, repacking and putting them back on sale again,” the researchers explain.
The problem of disposing of returned items is prevalent in both the electronics and clothing industries, which are characterized by a wide variety of low-cost products. The more expensive the products, the more likely they are to be repackaged and resold.
The researchers found that addressing this issue is not straightforward. France has implemented a ban on throwing away returned items, but this does not fully solve the problem. If companies are required to donate unsold products in good condition to charity or second-hand stores, the value of their regular product range may decrease.
“Or you might have five lorries filled with the same clothes, there are no second-hand shops that can take on those quantities. Another example would be low-quality products, such as cheap headphones that break almost immediately. Second hand shops do not want to sell them at all,” they explain.
No free lunch
A good start would be to introduce compulsory fees for returns rather than offering them for free. While some clothing brands have implemented fees for returns, the majority of e-commerce companies still offer free return shipping.
This is because the costs of handling returns, including free postage, are outweighed by the profit generated from customers who make returns. These customers, overall, tend to generate more revenue than those who do not return items.
The problem with this approach is that for many cheaper products, it may not be cost effective to return them, so they may simply be thrown away instead. The researchers believe that around 70% of online consumers never return anything, so the problem is often caused by a minority.
“So it is a fairly small proportion who do return things, but on the other hand, the ones who do tend to do it a lot. Many of those who do not send things back say that the process is complicated and sometimes expensive, if there is a fee, and for that reason they hold on to products—only to throw them away later instead,” they explain.
More efficient
Once approach would be to ensure that returns are handled more efficiently so that it becomes not only financially defensible to take care of any items that are returned but also environmentally defensible.
“For example, we see that companies who work that way have reduced their costs for returns by up to 65%,” they continue. “Returns have been reduced by 15%. We think that this is part of the solution for creating sustainable return streams in a more circular business.”
The root cause of the issue is the fast fashion industry, characterized by the large-scale production of inexpensive goods that are often only worn for a single season. This business model is heavily dependent on the depletion of natural resources, the exploitation of labor in developing countries, and the use of fossil fuels.
Altering consumer behavior can be challenging, but the researchers believe that the European Union has the potential to play a significant role in resolving the problem. The EU has several ongoing initiatives to regulate product quality, with the goal of ensuring that products have a longer lifespan and can be repaired.
“The value of products has to be increased,” they conclude. “A new t-shirt costing just SEK 30 is usually only used a few times before—at best—ending up in a second-hand crate or textile recycling.”
