As the UK struggles to meet its net zero targets, millions of returned fashion items are incinerated, generating thousands of tonnes of CO2 emissions every year. According to a new report, digital sizing tools and return charges could reduce fashion industry returns by more than half.
In late 2022, the British Fashion Council (BFC) announced it had commissioned global strategy consultants from Roland Berger, in partnership with DHL, to carry out a report that hopes to solve problems surrounding e-commerce returns in fashion. The initiative formed part of the BFC’s Institute of Positive Fashion (IPF), looking to recognise the importance of investigating in innovation to secure profitable businesses, while safeguarding the planet and society.
In a statement, BFC’s chief executive Caroline Rush said at the time, “We are delighted to work with Roland Berger to help find a solution to the direct and hidden costs and impact associated with returns in the UK.”
The report has now been published, and at a time when fashion retailers are struggling with heightened costs and falling custom, due to the continued inflation crisis gripping the economy, the findings make for striking reading. Roland Berger found that the UK fashion industry lost an estimated minimum of £7 billion in 2022, due to returns.
At the same time, when the industry is coming under intense scrutiny to reduce its carbon footprint, a significant amount of waste was generated from fashion returns that could not be resold. While most fashion items can be resold after complex processing, the study found approximately 3% of returns were never put back on sale. It is estimated that more than 50% of those unsold returns were sent to landfill, with another 25% are incinerated – while only the remaining 25% were being recycled. Each year, UK returns are therefore estimated to generate about 750,000 tonnes of CO2 emissions.
On top of the fact some fashion categories are producing as much as 15% too much output, with most of that ending up in landfill, this is simply not sustainable – financially, or ecologically. To that end, Roland Berger found that fashion retailers could deploy a blend of technology and customer service shifts – to radically reduce their returns, their impact on their purse, and the planet.
At present, size and fit are the biggest reasons for returns – with 91% of the consumers who returned items in the last three months citing it as a top cause, and 73% also noting bracketing size as an issue. When asked which methods retailers could deploy to help reduce this, three-quarters of shoppers said improved product descriptions could help, while 72% also said digital tools such as size calculators and a 360 view of goods could help. The majority of each age-group also said they would be willing to share digital size and fit details with brands to show how items would fit on their digital avatar. Even the most cautious group of over 41s saw 56% of consumers agree to this, while Millennials were most enthusiastic, at 74%.
Roland Berger calculated that large retailers with approximately 70% of sales coming from their website, could reduce cost of returns handling by 20-40% with the introduction of sizing calculators and avatars. At the same time, implementing stricter return policies, linked to environmental messaging, could also see the number of returns fall. While many firms offer free returns, 56% of shoppers told Roland Berger returns charges would incentivise them to keep products they ordered. At the same time, this could lead to obtaining new customers – with shoppers increasingly avoiding spending money with retailers whose sustainability credentials are poor.
Siobhan Gehin, a Senior Partner at Roland Berger, commented, “Tackling the returns issue is being prompted by lower consumption, impending legislation and higher operating costs – the latter probably being the strongest motivator for companies to move from a linear to a circular business model. While the future for fashion is circular, achieving it is not an easy task. The prize, though, is that circular fashion businesses are estimated to grow 18% per annum from where they were at the beginning of this decade to 2030, whereas the rest of the market is looking at just 3% annual growth.”