Fashion has a notorious environmental footprint, accounting for up to 10% of global carbon dioxide production. This is exacerbated by a fast fashion business model that encourages the frequent purchase of low-priced, non-durable items.
About 30% of online purchases are then returned, most of which end up in landfill. In 2020, about 2.6 million tons of returns were disposed of in this way in the US alone. The problem has become so notorious that online retailer Boohoo recently followed a number of high street brands into starting to charge for returns in order to discourage them.
But what are the reasons for high returns and why many returned items are not resold?
The pandemic has fundamentally changed the way we shop, with the temporary closure of physical stores representing a boon for online retailers. However, the growing market share of online retail has its origins in the old marketing practices of fast fashion. The premium placed on novelty, low prices, and free shipping and returns all encourage customers to shop multiple options with the knowledge that they can return items freely (known as “brackets”).
Buy-now-pay-later schemes such as Klarna, which allow customers to order without paying up front, have accelerated online consumption. Research shows that by offering such “payment solutions”, retailers will typically see a 68% increase in average order value.
Industry research suggests that cart abandonment rates decrease by nearly 40% after introducing payment solutions. Discount events such as Black Friday also drive sales, with fashion accounting for about a third of all Black Friday spending.
Fast fashion is synonymous with throwbacks
Despite the appeal of low prices and discounts, cheaply produced fast fashion items can usually exhibit quality and fit issues, so are synonymous with returns. Impulsive spending, fueled by discounts, also often leads to regret, again increasing the incidence of returns. Therefore, the 32% return rate for apparel orders is less than that of other e-commerce sectors, compared to only 7% in consumer electronics.
For retailers, processing returns is also fraught with uncertainty and complexity. It is not known which items will be returned and in what condition. Often, once they are used, little can be done to make them desirable for repurchase.
This is especially true in the case of “wardrobe”, where a purchased item is worn once before being returned. Retailers not only face financial losses through rework, but risk a tarnished reputation if worn or damaged items are recirculated.
ASOS previously announced it would tighten its “wardrobe” by closing down fraudulent return accounts. However, the threat of a bad review often leaves sellers with little option other than a refund.
Many retailers sell these returns to liquidators, who turn obsolete merchandise into quick cash. A cursory look at eBay reveals dozens of “return Amazon” pallets available to the highest bidder.
Challenges facing retailers
Both the cost of processing returns and their increased volume represent a challenge for retailers. The significant rework costs involved in product returns mean that for fast fashion items, they often outweigh the potential resale revenue. Remuneration of relatively high-cost local workers under labor-intensive return reprocessing is widely held to be responsible for this.
Therefore, getting rid of returns is often the most cost-effective decision. An ITV investigation into Amazon’s Dunfermline warehouse claimed the online retailer threw away tens of thousands of returned consumer goods every week. Amazon said none of its items went to landfill, but instead were donated, recycled or incinerated for energy recovery.
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The fashion industry collectively produces over 92 million tons of textile waste annually. In the US alone, clothing returns create more annual carbon dioxide emissions than 3 million cars.
Carbon dioxide is initially emitted through the collection of returns, before increasing as the returns are either incinerated or landfilled. Due to the rapid proliferation of synthetic fibers, returns can take up to 100 years to fully decompose, emitting carbon dioxide and methane in the process, as well as leaching harmful substances into the surrounding soil.
How are retailers handling returns?
While the environmental implications of product returns are clear, fashion retailers also have a financial incentive to address the issue of costly returns management.
Because of the complexities surrounding reprocessing, fashion retailers are increasingly handing over the responsibility to specialist firms, such as ReBound Returns, which work with retailers to make the returns process more sustainable.
ReBound encourages retailers to donate returned consumer goods to charity through their ReBound Regift facility. This has so far facilitated charitable donations worth £190 million. ASOS says 97% of their returns are now resold and no items are sent to landfill.
As Boohoo’s latest move shows, some online retailers have tried to pass the cost of returns on to customers. While the rationale for this is primarily financial, the impact of similar policies on improving the environmental consciousness of customers is well known. Since 2015, the use of plastic bags has fallen by 97% in major supermarkets in England, following the introduction of a small charge.
Despite calls for greater sustainability within the fashion industry, fast fashion continues to thrive. If marketing practices that encourage waste and fuel emissions continue, the fashion industry will retain its unwanted reputation as a significant contributor to climate change. Retailers must reconsider the unintended effects of the relief offered by their return policies, balancing the need for customer retention with environmental consciousness.
