The growth of e-commerce during the COVID-19 pandemic has seen online returns double in 2020, underscoring the importance of a strong returns management program that serves both retailers and their customers.
U.S. consumers returned an estimated $ 428 billion in purchases to retailers in 2020. This represented about 10.6% of total retail sales, according to the National Retail Federation (NRF).
Reverse logistics is a form of returns management. It tracks products from the point of return by the customer and manages where they end up. Once returned, they can be resold, repaired, refurbished, recycled or simply scrapped.
The cost of reverse logistics can seem prohibitive. But the money businesses can save or recoup through activities such as “re-commerce” and the use of effective returns management more than outweighs the initial cost.
Reverse logistics have a direct impact on profit margins. As sales increase, businesses can see their margins eroded by the cost of managing the accompanying increase in returns. The NRF’s investigation found that for every billion dollars in sales, the average retailer incurs costs of $ 106 million in returns. By employing a returns management strategy, companies can get some of that money back.
Many retailers and manufacturers choose to use a third-party logistics provider (3PL) to increase their reverse logistics profit margin. Relying on such a service can streamline the process, save money on managing returns internally, and free up resources so companies can focus on other areas of the business.
Retailers and business-to-business businesses typically face high processing costs for handling returns. Expenses are incurred by the need to assess returned merchandise for damage, repackage and send items to another location for resale, and refurbish products resulting in loss of resale value.
In some industries, recycling can be a long and expensive process that requires companies to follow strict safety regulations, to ensure that items are disposed of properly. Some products that cannot be resold end up in landfills.
Many businesses don’t know the true cost of product returns. Even though they collect returns data, they lack the means to analyze it and spend little time assessing the role of returns in the supply chain. Instead, they focus on growing sales, which leaves them little visibility of potential revenue losses. Having products tied up in the warehouse can have a big impact on a company’s cash flow and expose credit problems.
An inefficient returns process can also affect the quality of customer interactions, which will cost future sales if customers are unhappy and keep shopping.
A survey by consulting firm KPMG found that for almost 15% of returns, it took more than two weeks for the customer to receive a refund. This has a negative effect on the customer experience and the brand of the retailer. About 33% of repeat consumers in another survey said they would abandon a retailer if they had a difficult experience with a return.
Reverse logistics can solve all these problems. An efficient process creates value for businesses by converting waste into sales. They can quickly and efficiently re-enter their returned products into the supply chain, reducing storage and distribution costs and saving time and money.
The reverse logistics software maximizes the cost savings of returns management. It manages every stage of the returns lifecycle to achieve the highest possible ROI.
The reverse logistics software automates the process of identifying the path for returned products that will generate the best cost recovery. From the moment the customer starts the return process, the software can use machine learning to analyze products, return rules, and sales requisition. It can be tailored to the unique needs of the business to meet specific challenges.
The advantages of reverse logistics software include:
- All-in-one returns management portal,
- Automatic monitoring of returns,
- Cloud-based technology for easy access and sharing,
- Visibility on the reasons for returns,
- Data insight to help manage future returns,
- Forecast data, and
- Increased brand credibility and customer loyalty.
Reverse logistics software can help businesses reduce the number of product returns they generate in the first place. When returns do occur, it reduces costs through process efficiency and business rule integration, while improving customer service and increasing the likelihood of repeat purchases.
Matt Lhormer is Vice President, Solutions with G2 reverse logistics.