Just 9% of retailers are able to resell more than half of their returned products at full price, despite widespread adoption of circularity strategies, according to new research.
The Circularity Index from ReBound Returns and Advanced Supply Chain (ASC), based on research among 150 senior leaders at mid-to-large UK and European retailers, found 86% have established circularity practices covering areas such as resale, refurbishment, repair and recycling.
For more than a quarter (27%), circularity has become a core part of returns management.
However, retailers are continuing to lose value once products enter the reverse logistics process. On average, 12% of returned items generate no value at all, while relatively few retailers are successfully returning significant volumes of stock to sale at its original price.
There could therefore be considerable scope for e-commerce businesses to extract greater value from returns. Some 82% of retailers believe up to half of their returned inventory could generate additional value through improved recommerce strategies, while 62% regularly attempt to recover value from products that cannot be resold conventionally.
Stuart Greenfield, UK & European Sales Director at Advanced Supply Chain, said retailers should increasingly regard returned products as inventory with potential value rather than treating returns primarily as a cost associated with transport, processing and warehousing.
“The opportunity now is to look at what comes back as inventory with potential value, and determine the best route for each item, whether that is resale, refurbishment, repair, donation or recycling,” he said.
Greater visibility throughout the returns journey could help retailers make those decisions more effectively, with the eventual destination of products having implications for margins as well as sustainability performance.
The findings also come as regulation increases scrutiny of product lifecycles, including through the EU’s Ecodesign for Sustainable Products Regulation.
Inge Bujakiewicz-Baars, Head of Sustainability at ReBound Returns, said this was moving circularity from corporate commitments towards practical operational decisions about what happens to products that can no longer be sold in their original form.
For e-commerce leaders, the research highlights the increasingly close relationship between returns management, inventory visibility and profitability. With online returns representing stock that has already incurred acquisition, fulfilment and reverse logistics costs, identifying the optimum route back to revenue could become an increasingly important part of protecting margin.
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