It’s no secret that e-commerce shopping continues to be a key driver of revenue for many companies. What’s less well known is that it’s also a key driver of costs. Consumers have high expectations of what they can buy online, when it’ll get to them, and the return process if they need to use it. They expect to be able to quickly get goods, and to send them back easily and without paying extra. In fact, 88% of customers stopped shopping with a retailer because they introduced a paid returns policy.
But returns are expensive for retailers. E-commerce return rates in the U.S. hover around 20% (about double the rate of in-store returns) and that can grow to 40% for certain items, like shoes. That’s almost 1 in every 2 orders being returned. In addition to the costs of getting goods back to them, and whether they’re covered by return fees or absorbed to keep customers happy, retailers have struggled with meeting the demand for returns handling in their facilities, many of which were built and designed before the return order volume they’re experiencing now. So, what can e-commerce retailers do to optimize their returns process, and avoid losing so much money? It starts with understanding and optimizing reverse logistics.
What is Reverse Logistics?
Reverse logistics is the process of managing the return of goods from customers back to the retailer’s distribution or fulfillment center. It includes activities such as returns management, recycling, refurbishing, and disposal of products. As e-commerce continues to grow, reverse logistics has become an essential part of supply chain management, directly impacting customer satisfaction and operational efficiency.
Top 3 Trends Driving the Demand for Reverse Logistics
- E-commerce Boom: Continued growth in online shopping has led to a significant rise in product returns. Customers expect hassle-free return policies, which places a heavy demand on efficient reverse logistics systems.
- Sustainability Initiatives: Companies are increasingly focusing on sustainability and eco-friendly practices. This includes managing returns in a way that reduces waste, repurposes or recycles return materials, and refurbishes products for resale.
- Technological Advancements: Innovations in technology, such as IoT, AI, and industrial automation, have transformed reverse logistics. These technologies help in better tracking, managing, and processing returns efficiently.
7 Strategies to Improve Reverse Logistics
1. Implement Advanced Tracking Systems
Utilize RFID and IoT technologies to track returned items in real-time. This enables accurate inventory management and quicker processing of returns.
2. Automate the Returns Process
Automation can streamline the returns process by reducing manual errors, speeding up operations, and enabling scalability, to handle more volume without requiring more people to be hired, trained, and retained. Three examples of automation essential for streamlining the returns process are automated sorting systems, automated material handling equipment like forklifts, turret trucks, and tuggers, and automated wireless charging. Automated sorting systems can classify and route returned items efficiently. Automated material handling equipment can effectively move goods where they need to be and put them away. And automated wireless charging can ensure equipment used in receiving, moving, and putting away returned items is always charged and ready to operate, reducing downtime, improving efficiency, and ensuring retailers can efficiently handle growth in returns without needing to buy extra equipment or hire additional people.
3. Enhance Data and Analytics
Leverage advanced data and analytics to gain insights into return patterns and root causes. This helps in predicting future returns and making informed decisions to minimize them, from changing workflows and implementing additional quality checks to modifying customer communication and optimizing inventory management.
4. Centralize Return Centers
Establish dedicated return centers to handle all returned items. This centralization can improve efficiency, reduce handling times, and lower transportation costs.
5. Improve Customer Communication
Provide clear and easy-to-follow return policies and procedures. Enhance customer communication through automated notifications and updates on the return status, ensuring a smooth experience for customers.
6. Adopt Sustainable Practices
Focus on refurbishing and recycling returned products. Implement programs to resell refurbished items to recoup losses or donate them to reduce waste and improve sustainability.
7. Improve Order Accuracy
Most customers prefer not to return items and want retailers to get their orders right, highlighting a frequent pain point: returns that are caused by inaccurate orders or inaccurate order information. Retailers that invest in processes to ensure order accuracy experience higher customer satisfaction and lower costs, driving greater profitability and brand loyalty. Check out these 5 tips to improve order accuracy for tangible changes you can implement in your fulfillment or distribution center now.
Reverse logistics can be efficient and effective, driving customer loyalty and satisfaction and reducing organizational strain, as opposed to increasing it. These strategies are a good place to start for companies looking to enhance reverse logistics processes, drive significant cost savings, improve customer satisfaction, and increase sustainability. To discuss your operations and how automating reverse logistics can reduce costs and improve efficiency, contact us today.
