Almost all retailers offer a return service for items purchased online, and many use the option as a selling point. Although the service is popular with consumers, it can be a real headache for retailers, with significant logistics costs. Return management is also a vital part of the customer experience.
This article explores six tips for efficient, low-cost management of return-related logistics.
Simple return policies were originally designed as a way to remove barriers to online shopping, especially in the fashion and clothing sector. Yet these days, returns are a central plank of online retailers' promise to their customers. Some 66% of French online shoppers reportedly check a website's return policy before proceeding to purchase, making it the third most important factor in the buying decision after price and delivery terms.
Around one-quarter of all products bought online are returned, compared with just 10% of those purchased from a physical store. This means that, for online retailers, returns are just as important as shipping from a logistics perspective—not just in terms of processing costs and stock immobilization, but also in terms of brand image and environmental footprint. So how can retailers implement efficient, low-cost reverse logistics?
Organize flows by return reason
For both shipping and returns, each logistics flow represents a cost—in storage, transport and labor. Yet consumers return items for different reasons, and each of these reasons involves different processes.
If a customer returns an item because they aren't happy with it, the process works like this: the product is received at the warehouse, the product and packaging are checked, the item is returned to stock, and the customer is issued a refund (or an exchange, which follows the standard shipping process). The same model applies to “try before you buy” offers, except that an even higher proportion of these products tend to be returned. Conversely, if a product is returned because it's faulty, the flow needs to be directed to the after-sales service provider, or to a waste management and recycling facility. Meanwhile, deliveries sent to the wrong address or that haven't been collected are easier to manage because the parcel hasn't been opened. This simplified process means the item can be shipped again more quickly.
At the same time, unsold items in physical stores involve specific logistics flows, not least because of the sheer volumes involved.
Limit immobilized stock by switching to real-time management
One way to limit the amount of immobilized stock is to mark a product that a customer wants to return as “in stock”. That way, the item can be put back up for sale on the retailer's website without having to go through the normal storage processes: once the product returns to the warehouse, it can be quickly checked and shipped to another customer.
Cut the cost of managing unauthorized returns
In reverse logistics, an authorized return is an unexpected return, often arriving without a label or other document that indicates the order and customer in question. Although this is very much a minority practice, managing these returns has a significant cost in time and effort.
In such cases, it's important to have an advanced search function that allows operators to quickly and easily identify the returned item. Where it can't be identified, another solution is to allow operators to mark the item as “received” in the system so it can go straight back into the distribution circuit. Reconciling the return with the customer can be done separately or at a later time. This approach also helps limit the amount of immobilized stock.
Optimize checking and re-stocking processes
All returns need to be checked manually to confirm whether the customer has returned the right product, and whether the product and packaging are intact. Operators therefore need tools—such as a smartphone or tablet camera—that allow them to quickly and easily open a dispute with customer services if needed.
As for physically returning the item to stock—a process that requires operators to move, and therefore eats up time—one solution is to set up special areas for returned products. That way, returns can be given priority over other items in stock when a new order arrives.
Use local return circuits
Another way to gain efficiency is to shift away from having all returns sent to a warehouse, and to switch to physical distribution channels instead. Of course, this is only possible if the retailer has a logistics information system that gives a comprehensive, real-time overview of the entire supply chain.
Under this model, the return label could be printed with the name of a nearby store that has run out of the item in question in that particular size. This approach has two benefits: it reduces the return process to a single flow (and, therefore, cuts costs), and it also limits the impact of the process on the environment.
Environmental responsibility is becoming an increasingly important factor in both brand image and consumer decision-making. So although return processes need to remain as simple as possible (and often free of charge), retailers that deliberately seek to cut the environmental impact of their logistics flows will likely have a strong selling point in the years ahead.
Outsource reverse logistics?
Some retailers, especially the larger outfits, are setting up dedicated, central return platforms or even outsourcing their reverse logistics—at least in part. Outsourcing may be a good option, since logistics providers have the expertise and infrastructure to manage these flows properly. Likewise, doing so can help cut costs and drive up customer satisfaction.