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How Some Companies In Germany Are Trying To Cut Down On The Number Of Retail Returns


As online shopping has grown in popularity, so too has the number of online returns. One place that is especially true is Germany. Online shoppers there return more goods than in any other European nation. Alexi Horowitz-Ghazi from our Planet Money podcast looked into why Germans seem to love returning and how some companies are working to cut down the cost.

ALEXI HOROWITZ-GHAZI, BYLINE: To find out what's behind Germany's online returning spree, I called up economist Gerritt Heinemann. He's an online retail expert. But perhaps more importantly, he's got a front-row seat to modern shopping culture.

GERRITT HEINEMANN: I have three daughters, millennials. So I'm always looking what they're doing.

HOROWITZ-GHAZI: So you have kind of a focus group in your house.

HEINEMANN: Yes, and less and less money (laughter).

HOROWITZ-GHAZI: He says to understand how Germans got so comfortable with returning things, you have to go way back to before the internet.

HEINEMANN: It started with mail-order retailers.

HOROWITZ-GHAZI: Mail-order retail - think like the Sears catalog. It's been big in Germany for a long time. And returns are kind of built into the way it works there. German consumers will order from a catalog and receive the goods before they pay. Whatever they like, they keep and pay for. The rest, they send back. And Heinemann says when online retail started taking off in the late '90s, politicians put that same idea into a consumer protection law known as the right of Revocation.

HEINEMANN: By law, consumers can return within two weeks without a reason.

HOROWITZ-GHAZI: So he says when mega retailer Amazon came to town offering cheap and easy returns, Germans were primed to take full advantage. And he says that similar policies have since become the norm.

HEINEMANN: Amazon is setting the standards.

HOROWITZ-GHAZI: He says German online retailers have had to match Amazon's return policies in order to compete for customers, especially younger shoppers who like to try things on before they commit to buying them.

HEINEMANN: Young fashion might be the biggest problem because fashion customers are pushing the return rates.

HOROWITZ-GHAZI: And with rising rates come higher costs, both environmental costs - all the packaging and fossil fuels it takes to transport, sort and restock returned goods - and economic costs. One of the companies trying to engineer a solution to some of these costs is Germany's third largest online retailer Zalando, which specializes in clothing.

STACIA CARR: We have some 2,000 brands on the platform. That's a whole lot of slight variations to a sizing system.

HOROWITZ-GHAZI: Stacia Carr is one of the people tasked with reducing Zalando's return rate, which is around 50% of all items sold.

CARR: So what we try to do is help customers find the right fit the first time through offering algorithmic size advice.

HOROWITZ-GHAZI: That sounds very complicated.

CARR: It is. But for our customers, it's really simple. We just tell them, hey, these jeans run a little bit big. You might take one size down.

HOROWITZ-GHAZI: Carr and her team analyze real-time returns data, looking for patterns in the reasons customers give for sending items back. They also employ a team of fitting models to help offer sizing advice, like Lizzy Sell.

LIZZY SELL: My whole life, everything has fit. Like, I'm actually the most standard human you could meet.

HOROWITZ-GHAZI: That sounds like a superpower.

SELL: (Laughter) Yes, it is. But I will only use it for good.

HOROWITZ-GHAZI: Sell and the rest of the models spend their days listening to disco, looking very hip and trying on new items before they hit the website.

SELL: I think I've tried on, like, 15,000 dresses or something, so I've got a really good sense of how things should fit.

HOROWITZ-GHAZI: Zalando says it's managed to reduce the number of size and fit-related returns by about 4% over the last couple of years. But given that the company is growing by over 20% each year, it's clear there's still a long way to go.

Alexi Horowitz-Ghazi, NPR News. Transcript provided by NPR, Copyright NPR.

Alexi Horowitz-Ghazi is a host and reporter for Planet Money, telling stories that creatively explore and explain the workings of the global economy. He's a sucker for a good supply chain mystery — from toilet paper to foster puppies to specialty pastas. He's drawn to tales of unintended consequences, like the time a well-intentioned chemistry professor unwittingly helped unleash a global market for synthetic drugs, or what happened when the U.S. Patent Office started granting patents on human genes. And he's always on the lookout for economic principles at work in unexpected places, like the tactics comedians use to protect their intellectual property (a.k.a. jokes).

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