Just another manic (black) Friday?
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Article Type
Sustainability Soapbox
Topic
Responsible Investing
Published
November 24, 2023
Read time
3 mins
Author
Miranda Beacham
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Around this time last year, we wrote an article about the amount of energy used and waste generated during the mass purchasing frenzy that is Black Friday. This year, we thought it would be interesting to look at this cultural event from another angle - what happens to all the returns?

 

Statistics from last year show that sales of goods are reducing, although the total amount of sales is still an enormous number. From a sustainable standpoint, one aspect of this activity is a concern; research from Royal Mail in 2018 found that over 50% of all clothes bought online and 42% of electrical goods are actually returned.

 

In term of clothes shopping, consumers understandably want to try before they buy although it is becoming less common to do so in a shop, partly because shop floor space has reduced due to the structural shift from the high street to online. The convenience of getting your purchase delivered to your door, and then having the ability to try on new clothes in the privacy of your own home, is more appealing than a shop changing room. There is a cost though; the fact of the matter is that returns become harder to process and therefore create a new area of concern for many retailers. A report by Rebound showed that in 2022 there was a 26.6% increase in returns compared to 2021, while the costs associated with processing these returns continues to rise.

 

It is difficult to ascertain the scale of resale of returned goods and there are some good practices such as Marks and Spencers new click-and-return service that avoids the need to stand in long queues (and additionally benefits the retailer as the returned goods can be put back on sale a lot quicker). In clothing in particular, seasons are short, so even if a garment is returned within a 30-day period it will have lost value if the season is changing. At the extreme end of fast fashion, a season is only six weeks, so many items in this area are not worth trying to resell. At the same time, some consumers are not particularly honest and will wear an item with its labels on and then return it, meaning it is not suitable for going straight back on the shop floor or website.

 

In the late 2010s a number of retailers were publicly criticised for sending goods straight to landfill - which is obviously the worst possible outcome in terms of sustainability for unwanted goods. The fact that retailers are trying hard to work around this situation in a number of novel ways would suggest it could become an area of competitive advantage.

 

There are a number of different retailers trying different methods - from setting up their own e-commerce shops to the likes of Nordstrom and Patagonia having whole areas of their business focused on pre-loved garments. However, a growing number of third parties, individuals or small businesses are buying up pallets of returned items and reselling them on e-commerce sites such as Ebay and Vinted. This is an area previously inhabited by large organisations such as TK Maxx. In the US, the likes of Target, Macys and Amazon sell returned items on to these third party sellers by pallet or truckload. This means that each one can be a bit of a lottery for the buyer - but enough of them seem to be profitable to drive growth in these businesses.

 

It is clear the evolution of retail is still working its way through how best to balance the shop floor and website - and it will be interesting to watch how this continues to change. However, it is also clear that the current level of returns is not sustainable in so many ways. So maybe pause for a minute before clicking on those hard to resist bargains - for the good of your pocket and the environment.

Disclosures

Author

Miranda Beacham
Head of UK Responsible Investment

Miranda Beacham is head of UK responsible investment. Her role involves overseeing the environmental, social and governance research process for ethical and sustainable funds as well as overseeing the stewardship activities, supporting the ESG integration processes and further research in ESG issues for investments across Aegon AM UK.

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