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Upgrading the returns process for a more circular economy

Retail

We spoke to Patrick Eve, Managing Director of ZigZag Global to explore ways to improve sustainability in the supply chain and increase revenue for retailers with reverse logistics.

Around 30 percent of online shoppers purposely over-purchase, with the intention of returning any items they are not happy with. Although this aspect of e-commerce is popular with shoppers, it creates a problem for retailers, with the global cost of product returns estimated at upwards of USD 220 billion. Free shipping, inefficiency and the low residual value of the returned merchandise all contribute to the impact of the high return rate. This problem is likely to continue as e-commerce penetration increases, and as retailers are forced to maintain free shipping and return policies in order to remain competitive.

One way to deal with the drag on revenue caused by returns is through introducing circular elements into reverse logistics, the process which allows for goods to be reused, recycled or disposed once they have reached their typical final destination. The end goal is to optimise the product lifecycle so that goods don’t end up in landfills. This allows retailers to reduce both environmental impact and costs. To explore how reverse logistics can help improve retailers’ bottom line, Springwise spoke to Patrick Eve, Managing Director of ZigZag Global.

Based in Britain, ZigZag was founded 2015 by Al Gerrie and Laurence Guy. On the front end, ZigZag provides retailers with branded returns portals that provide consumers with multiple returns options. On the back end, ZigZag provides an SAAS platform that tracks all stock returns through ZigZag’s global network. The platform uses predictive analytics to determine the best ways to process and route the return – whether to consolidate, resell, wholesale, and/or refurbish. ZigZag initially raised just over $1m through crowd and seed funding, and has just concluded a multi-million dollar Series A funding round at the end of last year.

According to Eve, many of the big challenges in e-commerce logistics are focused on consumer expectation.

“What we’re facing right now is very much a change in expectation among consumers and that is primarily driven by a sense now that a number of the items that are bought online are consumable, rather than something that you will purchase and nurture for a number of years … Consumer demand is driving the expectation that we should receive everything very, very quickly, for free delivery, and people nowadays expect some kind of free return on that item as well. But really, there is no such thing as a free return.”

Eve argues that businesses need to examine how they can work closely with their customers to deliver the best value, while at the same time tempering expectations around the life cycle of their goods. This will require retailers to understand how to break down and reuse their products right from the start of the manufacturing process. This is a big task for retailers focused on overcoming the day-to-day challenges, and Eve explains that it is also why ZigZag chose to focus on reverse logistics.

“Our biggest challenge, and the one that really gets us out of bed in the morning, is looking at how we can insure that those items, which can quite often be 65 percent of all items sold, do not end up in a landfill, but help the retailers to resell those items at the fullest value as quickly as possible.”

Although a number of other companies operate in the returns space, ZigZag sees itself as the glue that connects retailers with a global network of warehouses, resellers and courier companies. The company has found a huge appetite for its product form retailers, pointing to a need for such solutions.

“We’re really just trying to break the status quo, of the label in the box, for example, by providing the retailer with five or six options in each market, which might be a courier collection, drop off point, a locker or a postal service, to try and get those goods back as quickly as possible.”

This rapid return is a key part of enabling the retailer to then reuse or resell the item, as well as optimising the supply chain, all of which ultimately leads to happier customers. ZigZag’s predictive analytics also helps companies make decisions about what products to produce. Says Eve, “One core component is around sizing. Many retailers might well understand the size of their customers in the UK, but may … [have] their Japanese sizing, for example, too large. So, we’re helping them to bring down that returns rate and increase customer loyalty.”

ZigZag also sees reverse logistics as a key part of the circular economy. Around 60 million tons of textiles are produced each year, and less than 1 percent of that will ever be recycled. ZigZag hopes to change this through taking advantage of online marketplaces. At the same time, Eve emphasises that this reselling needs to be targeted.

“Our focus is really about the resale, the replace and the donation … The big challenge that we face is in protecting the value of the retailers’ items and of the overall brand, not dumping products onto the market which will devalue the brand.”

In the future, Eve sees even greater expectations on companies to transparently demonstrate their circular economy credentials. He feels that, for retailers, this will always be about aligning the circular economy with profitability, saying that, “No business is ever going to be able to drive forward these initiatives if it doesn’t also align perfectly with their bottom line and their profitability.”

As for the future of retail, Eve feels that the sector will continue to change, with a focus less on traditional high street retail and more on omni-channel retail and personalisation. For Eve, logistics will have a big role to play in delivering customer loyalty, pointing out that for retailers to succeed in the future, they will need to, “remain flexible on their footprint and … of course take advantage of international markets and globalisation.”

One big challenge for ZigZag comes back to consumer expectation. It is in convincing customers to do more of the work in helping to reduce the environmental cost of returns. ZigZag has been selected as a People’s Choice Award Finalist for The Circulars 2019, illustrating that reverse logistics may be a good way to meet this challenge.

“One of our focuses at ZigZag is really looking at how we can use what we call the drop off network, the corner shops where you can drop off your e-commerce return instead of having it collected from your house. Getting consumers to hit the pavement and walk and drop their goods off and collect them, and see how we can influence a reduction in urban congestion and carbon footprint as well. ”

Read more about ZigZag Global.