Ryan Higginson, VP and UK/ROI country leader, Sending Technology Solutions, Pitney Bowes, examines the growing returns sector
Online shopping is a universal behavior. In the UK according to a recent study 98% of shoppers buy online, and 45% do so daily or weekly. E-commerce companies continue to invest in smart website design to give buyers as true-to-life an experience as possible, but despite this, choosing an item on screen is never quite the same as seeing it in store. Inevitably, products will need to be returned. Returns have become an integral part of the consumer online shopping experience.
The 2019 Pitney Bowes Online Shopping Study found that 67% of UK online shoppers said they had made a return in the past year. More than half the US online shoppers questioned in the study said they buy items intending to return some of them – a practice so common it’s now known as ‘bracketing’.
Some generations are returning more than others. Three quarters of US millennials returned an online purchase in the past year, and 60% of those have returned up to 30% of their purchases. These behaviors – buying and returning – and the parcels generated as a result have had a huge impact on the shipping and logistics industry and parcel volumes continue to rise significantly.
The latest Pitney Bowes Parcel Shipping Index found the growth in parcel volume for the UK alone more than doubled since the previous year’s Index, rising from 6.1% to 12.4%. The Index revealed that:
- 5 billion parcels were sent from the UK in 2018;
- This equates to an average of 53 parcels shipped per person, an increase of almost 12% from the previous year (48);
- Which is 111 parcels shipped per second; and that
- Parcel revenues have grown steadily to £11bn (US$14.3bn), achieving CAGR of 6% from 2013-18.
The annual report discovered that global parcel volume reached 87 billion in 2018, up from 74 billion parcels in 2017 and the highest since the Index began. Despite global trade uncertainty, the report forecasts this figure will more than double within the next five years and reach 200 billion parcels by 2025.
The industry has responded to the pressure of these increasing parcel volumes by accelerating innovation at an unprecedented rate:
- Automation reduces manual processes and accelerating productivity, as parcels are processed faster and at greater scale than ever before;
- Sending technologies combine powerful SaaS-based software platforms with sophisticated functionality at the point a parcel leaves its origin; and
- Real-time tracking systems provide transparency throughout the entire parcel’s journey and minimize the risk of parcels going missing or undelivered.
Investment and development in last-mile technologies continues, from UAVs making drone delivery a reality, to intelligent parcel lockers enabling 24/7 collection with notifications via mobile and electric delivery vehicle startups such as Arrival.
New ways to generate value
The industry remains under pressure to keep costs down for senders and carriers. For returns, there’s one thing that 70% of US consumers in the Pitney Bowes Online Shopping Study really don’t like: having to pay for them, with 61% saying they hate it when they miss the returns period and can’t return their items. Free shipping is crucial for consumers: it remains the number one loyalty driver an online retailer can offer its customers. The study found that free shipping was four times more likely to drive consumer loyalty than any other feature that a retailer could offer.
Consumers expect to repeat the shipping experience they receive on marketplaces and with larger online stores, regardless of the size of the business they’re buying from. Many smaller retailers simply don’t have the economies of scale shared by these larger companies, nor are they in a position to absorb the costs.
Industry innovators are finding new ways for sellers to generate value and still deliver a customer experience that’s memorable for the right reasons. Next generation sending technologies are now designed specifically to help senders maximize cost savings: for example, APIs, built into sending technology platforms, increase options for senders. They can quickly access and choose from a variety of different carriers, rates and services, sometimes from a single, all-in-one platform. For those organizations managing high volumes of returns, package tracking software helps them manage these incoming parcels productively and effectively so they can begin the returns process with greater efficiency.
As fast as the volume of parcels increases, so does the pace of change. E-commerce companies, carriers and technology firms will continue to drive innovation to meet growing consumer demand for fast, reliable shipping. It’s an incredibly exciting time for the industry.