An extract from the pocketbook Flowscapes

The $100bn returns problem

Here is a worked example on a topic discussed in the Financial Times on the 27th of December 2019. It is titled ‘Retailers grapple with $100bn returns problem’. It was reported that in the USA alone, approximately $100bn worth of goods purchased online between Thanksgiving and New Year 2019 were likely to be returned. Of these goods, approximately two-million tonnes were likely to be sent to landfills. Online purchases are three times more likely to be returned than purchases from physical stores. Clothing is the most likely item to be returned. This represents an enormous economic and environmental waste.

 

There follows a worked example applying the flowscape technique to this problem. The first step is to write down a stream of consciousness list, then map the flowscape and finally draw some observations on the dominant ideas and alternatives areas of focus. Remember, a flowscape is a representation of one person’s perception of the situation, it is not right or wrong.

The dominant idea is A: Try on at home.

The dominant loop is JFE: Wasteful competition for sales via the returns policy.

‘Try on at home’ is the dominating idea as it has the greatest number of connections. Thinking about this, and the elements it connects with, leads to other possibilities. The FT article commented that there is no standard sizing across retailers and that some online returns are due to items being the wrong size. The word ‘try’ demonstrates the expectation of return. The current concept treats the customers home like a changing room in a shop. This concept has simply been carried over to the digital world. A change of concept would be ‘how to reduce the chance of a mismatch’. Perhaps retailers could offer a discount to customers who upload their body measurements or who have purchased and kept items of the same size previously. These details could be stored in a database referenced when the customer makes online purchases. The database could check for mismatches due to non-standard sizing before the customer completes the purchase. Variations of this concept are ‘reducing the chance that the item will be returned’, and ‘rewards based on purchasing history’. Retailers could offer different levels of discount based on whether customers retain or return items frequently. This would help retailers reduce the chances of people buying items, wearing them once with the label still attached and then returning them. (Element I: ‘People Cheat’). Retailers may then choose not to continue selling to people who frequently return items. Or, they may at least have conversations with customers who frequently return items to determine why.

 

One concept behind the loop JFE is competition for sales via free returns policies even though this leads to high wastage and lower margins. Here, there is a lock in effect. The retailer is trapped into offering free returns due to the fear that prospective customers will turn to their competitors if they do not.

Interestingly, Amazon offers a Wardrobe service for Amazon Prime customers. These customers pay for membership. This method allows customers to select a variety of clothes to try at home. Amazon provide a prepaid return package in anticipation that the customer will return some items. The purchasing transaction occurs several days later or when the customer decides which items to keep. In some ways, this still uses the concept of optimising returns. However, it is different because customers pay to be a member, the customer is known, and their purchase history can create better matches in the future.

 

There is a branch in the flowscape that is not part of the dominating idea or loop. It is the consequence of returns for the retailer. These include long delays, costs and time spent checking returns for quality issues. Some retailers also offer discounts on returned items that are now ‘nearly new’. A key assumption that could be challenged is ‘the sale of new items’. What if a retailer charged a daily rental fee for the time the item was with the customer? If the customer rented the item for longer than a certain period, then the customer would own the item. They could then sell it back to the retailer in the future. Returned items could be cleaned and repaired if necessary and resold to other customers. These items could be sold as ‘preloved’ clothing. Recycling is popular as society comes to terms with climate change. Clothing materials and designs could be chosen for their recyclability. Compared to traditional retail, however, this sounds like a weak idea. Yet, if the consequences of returns are taken into consideration, online clothing retail is already a business with low prices, high handling costs and high distribution costs. The $100bn of waste clearly indicates that some rethinking is required.

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