Returns and Second-Hand: How Dematic Promotes Sustainability in Online Retail

The doorbell rings for a package delivery. You jump up in anticipation – the item you’ve been waiting for has arrived! But after opening the package, disillusionment often follows. Maybe the product ordered looks different from the photo, maybe it doesn’t fit, or maybe it simply doesn’t meet your expectations. So, as an end customer, you package it up again and take a look at the retailer’s returns policy.

We’ve all experienced this at some point and Kimberley Baudry, Global Market Development Director at KION subsidiary Dematic, is no exception. During our conversation, she tells us about the time she wanted to return a dress she’d ordered online but wasn’t able to. The merchant simply didn’t want the take the dress back, probably because managing returns was too expensive and time-consuming for them. Instead, Kimberley Baudry just received a credit note for the purchase price and a request to donate the 60-dollar dress to a non-profit organization. “This underlines the predicament faced by many online retailers,” says Baudry. “They strive for sustainability, but handling returns is often a challenge.”

A study by the University of Bamberg shows that almost one in every two packages containing clothing or shoes are returned in Germany. Rather alarmingly, 50 percent of these returned items – equivalent to nearly 20 million garments each year – are not resold by online retailers, but simply disposed of instead. The reason behind this is the high outlay (and the associated high costs) that usually go hand in hand with reselling. Every returned item must be checked for any damage or dirty marks beforehand.

Storing, inspecting, and deciding what to do with goods like these are the central pillars of returns management. This is exactly where the software and hardware solutions offered by our Dematic subsidiary come into their own, by offering innovative approaches to promote greater sustainability in the fashion industry.

Dematic has specialized in constructing automated storage and sorting systems for many years. Many of these solutions were developed specifically for certain industries. The fashion sector, for example, benefits from the Dematic Pouch Sorter –an order fulfillment system optimized for clothing and accessories, with pouches suspended from rolling adapters running in a track. “The pouch system not only saves space, it also enables fast order processing,” explains Dematic expert Kimberley Baudry.

The Pouch Sorter can also be used to temporarily store fast moving returned items to be used as a prioritized inventory when fulfilling new orders and sort unsold and slow-moving returns to SKU level to ease the restocking tasks. For online retailers this is proving to be very helpful when it comes to making the important task of returns management faster and more efficient. First of all, each individual returned item is received, stored, and labeled for tracking purposes.

In the next step, the returns go through an integrated quality control system. Here the goods are checked to ascertain whether they are damaged or whether they are still in brand-new original condition. In turn, this determines the necessary processing steps and the product’s intended destination. Products that are suitable for resale can then be temporarily stored in a so called dynamic buffer of the pouch system, making them available for subsequent orders. All information is recorded in the digital system and can be automatically shared with other customer programs (e.g. ERP systems), thanks to the seamless integration of the Dematic software.

“The standout feature of our solution is transparency,” says Andy Orrell, a software specialist at Dematic. The system integration provides a company with an overview of all relevant data relating to a particular return, such as the cost price, the condition of the goods, the potential (re)sale price, and the costs for any reworking or repairs. “This data can be used to quickly and carefully decide whether to reuse or dispose of an item,” explains Orrell.

The Dematic solution can be used to decide whether a returned item ends up back in the online shop, in a second-hand store, or in a clothes recycling bin. For many online retailers, this is important not only from an economic point of view, but also to help them achieve their sustainability goals and meet their reuse quotas.

Dematic’s solutions are not only used for returns but can also promote sustainability in others areas of the fashion industry. We’re talking about the “classic” second-hand trade, when private individuals sell clothing that is still in good condition, but no longer corresponds to their personal taste or needs. There are now specialized online retailers who buy goods like these privately, then resell them and handle all the time-consuming sales steps on behalf of the individual. This includes photographing, describing, and pricing up the item, as well as shipping it to the buyer. When it comes to their sorting and storage needs, second-hand shop retailers like these also often rely on solutions such as the Pouch Sorter developed by our subsidiary Dematic.

Studies predict that the global second-hand fashion market is set to grow by an impressive 127% to 218 billion US dollars annually by 2026. This enormous increase highlights a significant change in the fashion industry: The trend is moving away from fast fashion towards greater sustainability. “An increasing number of customers prefer second-hand fashion and attach great importance to the fact that garments can be worn over a long period of time,” says Kimberley Baudry from Dematic. The driving force behind this is Generation Z, or those born from 1995 onwards, who are particularly concerned about climate change and protecting the environment.

This trend is likely to become incorporated into law, at least in certain parts of the world. The EU Commission plans to issue guidelines for making textile products on the European market more durable and recyclable by 2023. What does it mean? More recycled fibers, no hazardous substances, and compliance with social rights and environmental protection requirements. Regulations like these seem to make sense when you consider that, according to a study by the Technical University of Berlin, around 2,500 liters of water are used to produce just one T-shirt.