Simon - Leveraging In-Store Returns 2021

LEVERAGING IN ! STORE RETURNS TOENHANCE PROFITABILITY ANDLOWER GREENHOUSEGAS EMISSIONS

ONLINERETAILRETURNS AREAGROWINGDRAGONRETAILERPROFITABILITY

—COVID-19-induced growth in online retail is driving a corresponding growth in returns of goods purchased online.

—In 2020, online retail returns doubled to $102B . —Online return rates are as high as 40% (apparel).

—Associated supply chain costs and inventory loss are negatively impacting brand margins.

—Handling costs —Shipping costs —Inventory days

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BUTSHIFTINGSHAREOFRETURNSTOTHESTORE CANHELPOFFSETTHISDRAG

—Online returns-to-store can be be processed and bundled in-store prior to a return shipment to the distribution center.

LOWER SHIPPING COSTS

5 Units Bundled into 1 Box

5 Units Returned to Store

savings in overall return shipping costs 73% = savings in overall return shipping costs 85% =

DC

Ordered Online

Store

1 Package on 1 Truck Reduces Shipping Cost

10 Units Bundled into 1 Box

10 Units Returned to Store

DC

Ordered Online

Store

1 Package on 1 Truck Reduces Shipping Cost

—Remerchandising returns in-store saves shipping costs altogether. —72% of brands have already operationalized the processing of online retail returns through stores.

HIGHER TOPLINE SALES —Encouraging customers to return-to-store also gives brands a better opportunity to save the sale or up-sell. —71% of shoppers make a purchase when they return to store, far higher than when returning by courier or U.S. mail.

1 (Source: National Retail Federation 2020 Returns Survey Oct.-Nov. 2020)

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ISALSOMORE ENVIRONMENTALLYSUSTAINABLE

—Returning goods purchased online to store instead of the distribution center reduces carbon emissions by an average of 40% according to recent studies.

REDUCED PACKAGING Instead of customers sending each return separately to the distribution center, in-store returns require no packaging from customers; further, returns can be consolidated by the store and sent weekly to the distribution center. REDUCED SHIPPING COSTS The same consolidation opportunity also generates signi ! cant savings in shipping costs. Additionally, a portion of in-store returns are remerchandised in-store, avoiding shipping costs altogether. 64% of customers already believe returning an item to a store is more environmentally friendly than shipping items back via UPS, FedEx, or USPS.

64%

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STUDIESSHOWTHAT RETURNINGTOSTORE ISTHEGREENEROPTION

April 13, 2021 “Retailers should improve their strategic sustainability e # orts and encourage and educate consumers to be sustainable too. Sustainable options such as BORIS (buy online, return in-store) and central return drop-o # s at convenient locations reduce both costs and carbon emissions associated with returns.” Sustainability Insights: The Hidden Costs of Retail Returns https://coresight.com/research/sustainability-insights-the- hidden-costs-of-retail-returns/

April 5, 2021 “A handful of disjointed items thrown in a box and shipped to home in the suburbs involves more packaging and carbon emissions than driving to a local shop. Merchandise ordered online is also notorious for being returned at higher rates. It is widely known that apparel is particularly bad.” The O " ine Cost of Online’s Rise. https://www.adweek.com/commerce/ecommerce-brands-look-to-new- sustainability-measures-as-more-people-shop-online/

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AND ISTHEPREFERREDCHOICE OFSHOPPERS

When customers are required to pay for return shipping, 76% prefer to return-to-store. Regardless of who pays for return shipping, 61% of customers prefer to return-to-store.

SPEED/CONVENIENCE/STRESS FREE Respondent preferences for return-to-store are driven by the speed and convenience of making the return in person, the peace of mind in receiving an immediate refund, and the desire to avoid return shipping/restocking fees. —90% of shoppers highly value free returns, but only 51% of brands pay for their return shipping. OPPORTUNITY TO SHOP MORE 71% of respondents make an incremental purchase when returning an item to the store at least “some of the time.”

71%

69% CONVENIENCE OF TRIP BUNDLING

69% of respondents agree that it’s more convenient to return items purchased online to a physical store so that purchases frommultiple retailers can be returned at the same time in a shopping center.

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YETBRANDSDON’TTYPICALLYENCOURAGE SHOPPERSTORETURNTOTHESTORE DESPITE THE INHERENT ADVANTAGES OF DOING SO

BRANDS ARE AGNOSTIC TO THE RETURN CHANNEL & LOSE BENEFITS. Only 7% of our top 100 brands emphasize or promote return-to-store for online retail returns. UNTAPPED OPPORTUNITY. Brands have an opportunity to positively impact their bottom line and lower their carbon footprint by shifting from a passive return channel strategy to a more proactive one that encourages and incents shoppers to bring returns to store.

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BEST ! IN ! CLASS RETURN STRATEGIES TO PURSUE

—Actively promote/encourage return-to-store to customers. —Elevate the in-store-return option in post-transaction/return-related communications. —Proactively remind shoppers how close the nearest store is by providing the distance from the home on return slips and other return-related communications.

—Promote the consumer bene ! ts of returning to the store: Save Money . No shipping or restocking fees. Save Time . Faster returns processing. Save The Environment . Less packaging and shipping is greener. Save The Stress . No tracking or worrying necessary.

—Address potential channel con % ict: increased online returns impacting store KPIs. —Incent customers to return-to-store with special in-store-only coupons/o # ers.

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ENJOYTHE BENEFITS

—Lower Shipping Costs

—Higher Top-Line Sales

—Reduced Greenhouse Gas Emissions

—Elevated Consumer Experience

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CONNECT WITHUS

Andy Hutcherson Senior Vice President Innovation & Customer Experience

T (317) 464-8986 M (317) 220-9209 ahutcherson@simon.com

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SOURCES

! https://apprissretail.com/wp-content/uploads/sites/4/2021/01/AR3020-2020-Customer-Returns-in-the-Retail-Industry.pdf? " https://redstagfulfillment.com/best-practices-e-commerce-returns/ # https://www.shopify.com/enterprise/ecommerce-returns $ https://www.salecycle.com/blog/featured/ecommerce-returns-2018-stats-trends/ % Simon consumer survey, Feb 2021 & https://info.optoro.com/hubfs/Optoro_CM_2019_ReturnsReport_v10.pdf

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