Optimising Retail Returns: Reverse Logistics in eCommerce

Consumer expectations are changing.

No longer is it enough for eCommerce retailers to offer fast fulfilment of orders. Increasingly, consumers are expecting the returns process to mirror the ordering one. They don’t just want to be able to return their orders; they want to do so in a way that is quick, easy and fits around their lifestyle. So, what’s the answer for eCommerce stores? It’s an increasingly important process called reverse logistics…

What is reverse logistics?

In its most basic form, reverse logistics is the process of returning unwanted products from customers back to the retailer.

For eCommerce stores the reverse logistics process will involve the return of a product to a shipping partner, transport back to the warehouse, fulfilment centre or production facility followed by a quality check. Depending on the outcome of the quality check, the product will then either be restocked as inventory, or disposed of if faulty.

As you can see from this example, reverse logistics involves multiple touchpoints and can involve considerable resources and labour time. Therefore, if you’re going to provide your customers with a high-quality returns experience there’s a lot of things you need to get right.

To help you get to grips with these various touchpoints, it’s worth remembering the following 5 ‘R’s of returns management:

● Returns
● Recalls
● Repairs
● Repackaging
● Recycling

We’ll cover some ways of optimising your returns process later in this article.

Guide – you can find out more about reverse logistics and how it works in our guide here.

Why reverse logistics is important

For brick and mortar stores, the returns process has traditionally been straightforward – the customer goes back to the store to return their unwanted item. Returns in this sector are also a relatively small phenomenon – return rates in brick and mortar retailers tend to hover around the 10% mark.

For eCommerce stores however, the returns process poses much more of a challenge. For some eCommerce retailers, their return rates can be as high as 30%.

And, it’s vital that you get returns right. According to one study, 67% of online shoppers check a store’s returns policy before making a purchase, whilst 92% of shoppers will buy something from a retailer again if the returns process is easy.

So, it pays to get returns right – literally. In fact, returns can actually generate revenue for your brand.

The cost of returns

The cost of dealing with returns can quickly add up – which is why it’s so important that your reverse logistics process is as efficient as possible.

The type of costs you can incur with returns are surprisingly varied as the list below illustrates:

● Shipping costs.
● Labour time spent processing the returns, quality control, re-adding to inventory etc.
● The cost of the refunds.
● Costs associated with customer support.
● Costs of repairing, recycling or getting rid of the products.

These are just a few of the different types of costs that are associated with returns.

An important part of helping to reduce those costs, is to understand why returns happen in the first place…

Why do returns happen?

The best way to start thinking about your own reverse logistics process, is to begin by looking at why returns happen in the first place.

By identifying particular reasons or trends within your returns you’ll be in a better position to respond and not only improve your returns process, but prevent returns from happening in the first place.

Naturally, your own returns will be influenced by the type of product you sell and the markets you sell in to, however market research body Statista has identified some broad common reasons for returns to online stores:

● Defective / damaged product.
● Product is different from the description.
● The product is poor quality.
● Problems with delivery.

Whilst those trends above from Statista will provide you with a broad idea as to why you get returns – you should also carry out your own research. You can do this via surveys, reviews on the internet or simply by soliciting direct feedback e.g. getting your customer service team to ask relevant questions when dealing with returns.

How can you prevent returns in eCommerce?

But, why should you take the time to understand why you get returns? Because, preventing returns from happening in the first place is the first step in optimising your reverse logistics process.

Let’s take a look at each of the main reasons for returns and how you can prevent them from happening.

Defective/damaged products

We’ve all been there. You’ve ordered a product following plenty of research and shopping around online. You’ve been eagerly awaiting its arrival – only to find that it’s damaged!

We’re sure you’ll agree, it’s a disappointing and frustrating experience.

But, why does it happen?

For many eCommerce retailers it’s normally down to one of four reasons; unsuitable packaging, poor handling/shipping, damage in the warehouse or poor quality control.

How can you tackle each of those four reasons? We’ve taken a look below.

Quality control

You will always receive the occasional damaged product from your supplier – the trick is to ensure these are spotted before they are added to your inventory and dispatched to customers.
Ensure you have a robust quality control process in place. Your warehouse team should clearly understand the sorts of quality assessment checks they should be conducting whilst products are being booked in and added to inventory.

Damage in the warehouse

How is your inventory stored? Is your storage/warehousing space good enough? Damage in the warehouse occurs surprisingly often – and sometimes it’s inadvertent. For example, if you’re storing clothing in a warehouse that’s not properly ventilated, then your stock can quickly become damp or damaged.

If you’ve identified your warehouse as being the reason for damaged goods, you should take the time to completely review your warehouse processes to identify any points where damage may be occurring.

Unsuitable packaging

If unsuitable packaging is a common reason for returns then investigate alternative packaging suppliers. Whilst getting the help of a packaging consultant comes with a cost, you’ll find that this outlay is easily offset by the future reduction in returns.

An expert will be able to advise you on the appropriate materials, size, dimensions and filling materials that’ll keep your products safe from damage during transit.

Poor handling/shipping

Sometimes though, no matter how good your packaging is, if handling/shipping of your product isn’t carried out correctly, there’s no way you will avoid damage.

If you know that your quality control and packaging are up to spec, yet you still get returns for defective/damaged goods, then it could be time for some difficult conversations with your shipping partner.

If you are able to prove that your goods are being damaged in transit, then you may be in a position to demand compensation from your shipping partner. However, if the problem persists, then it’s easier just to switch to an alternative shipping provider.

Product is different from description

This is an issue which we can all sympathise with. You order a product and when it turns up it’s totally different from what you expected.

This false expectation can easily occur – but, it can easily be fixed too.

You should thoroughly review your product descriptions, headlines and photographs on your website and see if you can identify any areas that could easily be misconstrued. It can be worth using the services of online web testers who will browse your website and provide you with a detailed report, outlining any parts of your website that are confusing, difficult to use and which might lead people to order a product when they expect something else.

The product is poor quality

If you’re getting a lot of returns because your products are poor quality, you should act as quickly as possible. It won’t be long before review sites will be full of bad reviews of your products.

It’s important that you speak to your supplier and address why there are quality issues – it may be that they’ve switched to a different material or have changed their manufacturing process slightly.

Not only that, but you should address your marketing claims. If you are marketing a product as being ‘premium’ or ‘high-quality’ when it’s actually a budget item, you should correct your marketing claims so that your customers have a clearer understanding of what they are actually buying.

Problems with delivery

Thanks to eCommerce giants like Amazon, consumers expect their orders to be delivered quickly and without any issues.

If you are receiving a lot of returns because of delivery issues, you should investigate why this is happening. It could be down to incorrect address input – in which case you’ll need to make some UX changes to your website. Or it could be down to poor service from your shipping partner – in which case it might be time to find another one!

By looking at the above factors you can go a long way to reducing the number of returns that you get in the first place. It’s a classic example of how root cause analysis can solve many problems.

However, despite your best efforts you will still get some returns. It’s the nature of retail.

So, what can you do to improve your reverse logistics process and make those returns as easy as possible? Keep reading and we’ll tell you.

How to optimise reverse logistics in eCommerce

As we said at the outset of this article, consumers now expect the returns process to be as easy and smooth as the ordering process. You can create an efficient returns process by ensuring you’re doing the following things.

Prepare for returns before they happen

That sounds kind of counter-intuitive doesn’t it? But, when you think about it, it makes sense. Although you don’t want them to, you should assume that every customer will want to return their item.

Ensure that your warehouse is set up to receive returns in addition to sending out orders. Include pre-completed shipping labels in your customer’s packages so it’s easy for them to return their order should they want to. You can also work with shipping partners that offer dedicated ‘return to supply chain’ services.

Create a receiving process for returns

Within your warehouse you should ensure you have a section that’s dedicated to receiving and processing returned orders.

The staff that work on this section should be thoroughly trained on what they need to do to process returns, assess items, repackage, refresh, recycle or dispose of products.

Having a detailed process in place is one of the key ways you can reduce the cost of processing returns. An organised, efficient returns area can potentially yield better fulfilment rates, thus offsetting your reverse logistics costs.

Document your process and evolve it

Thoroughly document your returns process. Ensure that you have KPIs in place that your returns team has to hit. Once you’ve got a process and targets in place, you should then look to improve over time, driving further efficiencies.

The types of KPIs your returns team could work to, include (but are not limited to):

Intake – how quickly are returned packages opened, identified and processed?
Product verification – how are returned products classified? How should they be processed?
Traffic distribution – as with outbound orders, you’ll probably find that returns have peaks and troughs. As such, you can add KPIs for processing returns at key times of the day/week.

Partner with a reverse logistics specialist

The most effective way of creating a high-performance, cost-effective reverse logistics process that’ll deliver customer satisfaction is to partner with a specialist.

As this article makes clear, there’s a huge amount to think about when dealing with returns – especially if you want to get them right and compete with the biggest and best eCommerce retailers.

So, it makes sense to let an experienced, specialist reverse logistics provider take care of your returns for you. Companies such as ClearCycle have years of experience creating tailored, flexible reverse logistics solutions.

Speak to ClearCycle today, so you can concentrate on what you do best – growing your eCommerce store!


Find out more about reverse logistics and reCommerce on the ClearCycle news and insights hub

How to Use the Returns Experience to Build Customer Loyalty | A Guide to Reverse Logistics and How it Works | Inventory Liquidation Strategies Every Brand Should Know

Dan Hague ClearCycle

Dan Hague

18 August 2021

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