RFID and the Returns Epidemic: Item Level RFID Could be the Answer to Faster, Simpler Returns

By Dean Frew, CTO & SVP RFID Solutions at SML Group

Dean Frew Headshot (1)Whether in Europe, the Americas or Asia, the retail industry is currently facing an epidemic. In the past, commentators weighed in on trends such as ‘the death of the highstreet,’ how to obtain and retain brand loyalty and how to improve customer experience. However, whilst the industry was debating these issues, another challenge began emerging. A challenge that could be costing retailers significant profits – the returns epidemic.

According to an article by CNN, US consumers return around $380 billion worth of goods each year and $90 billion of which will be processed during the festive season. On average, only half of returned items find their way back to the shelf and around $5 billion worth of items will end up in landfills.

It could be argued that the reason retailers are witnessing greater returns is down to changing consumer behavior and expectations. Around 20% of items purchased online are returned, which is more than double the number of returns from brick and mortar stores at 9%. Customers have become much more comfortable with purchasing clothes online and returning those that don’t fit, and they are therefore ordering more items than ever.

Another argument for the noticeable increase in returns could simply be down to how straightforward retailers have made the process for customers. Digital natives such as Millennials and affluent shoppers now tend to treat returns as a natural part of the buying process for a product and expect retailers to provide the convenience of a simplified returns process. Online shoppers are now ‘buying to try’ with the intention of keeping their favorite item and returning the rest.

So how are product returns impacting retailers so significantly? The main factor influencing profits so much is because these products are becoming held up in processing through the supply chain. Companies around the world are struggling to manage the volume of returns effectively. By the time a product arrives back in the store and is put back on the shelf, the process has been so slow that the item is often out of season or no longer being sold in the store which means retailers are either having to sell the product at a discounted price or send back to the supplier. This leaves retailers in a position to reconsider their reverse supply chain in order to overcome this challenge.

Speeding up the Reverse Supply Chain

In order to address the returns epidemic and ensure that retailers are keeping profit margins as high as possible, they need to make sure the returns process is much more efficient. More retailers are beginning to look at game-changing technology such as Item-Level RFID in order to simplify this process.

The use of RFID has established itself as a highly effective tool to manage inventory throughout every stage of the supply chain. However, it can also be used as a tool to effectively trace inventory through the reverse supply chain and help retailers eliminate the time spent manually processing returns; enabling products to get back in store at a much faster rate. By using RFID, retailers can also extend the use of the RFID investment by utilizing analytics to begin tracking orders through the life cycle from birth to sale to the rebirth of an item, providing rich information that can better serve their customers.

Already a number of large retailers are looking at using RFID solutions to streamline their reverse supply chain processes and operations. RFID tags allow items to be read in bulk and accepted into a processing queue and provide the ability to prioritize items to process and speed-up movement of items back into a sellable status.

An Industry Working Together

With the evolution of technology and rise in online shopping, the apparel retail sector has seen a huge surge in growth and significant opportunities presented. Retail giant Amazon accounted for $8.5 billion in US ecommerce sales in 2017, a 4% increase compared to the previous year. However, this growth may be hindered due to these companies’ free return policies and they could see these profits hit by the amount of stock becoming held up in the reverse supply chain. With these opportunities also come challenges and the returns epidemic is one that is swiftly becoming the most prominent.

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