With the explosion of online shopping during COVID-19 lockdowns, efficient returns management strategies have become critical to the success of e-commerce companies. Even if your e-commerce store is well designed and user friendly, returns are going to happen. Size, color, and many other details are often difficult to determine, and consumers will need to send their choices back for an exchange or refund.
Peerless Research Group did a study on behalf of Supply Chain Management Review and determined that 60% of all commercial organizations rated reverse logistics as very important or extremely important.
In brick-and-mortar retail locations, COVID-19 also limited what sellers could do to inform customers before buying. Product demos, samples, and the ability to try on clothing and jewelry prohibited customers from gathering all of the information they needed before purchasing. This heightened an already pressing problem in the supply chain industry. How do you handle returns efficiently, while maintaining your margins?
As a result of the increased returns rate, retail stores, and e-commerce enterprises must ensure they are utilizing best practices in their strategy. Companies need to have in place a solid returns management plan. For many, this may require finding a trusted partner to assist with their reverse logistics.
7 Features of Successful Reverse Logistics
Forward logistics is a clean, straightforward process. You receive pallets filled with same-size cartons all neatly boxed and ready to be shelved, hung or displayed. But reverse logistics is much more complex and less nice and neat.
Gone are the days when returns arrive in an orderly fashion; no hangers or boxes. . They arrive at different times and in varying conditions, and handling these requires intensive labour for your teams. With so much invested in your returns process, it’s critical to assess the effectiveness of your strategy.
Read on to find out if your business’s rules for returns are following a successful plan, or if it’s time to reimagine your reverse logistics supply chain.
1. Customer Satisfaction and Retention
A good buying experience brings your customer back. So does a smooth and seamless process for returns. Most customers will come back if they have a positive return experience, while many will not if the return policies are too difficult to navigate.
In this connected era, 93% of consumers admit that online reviews affect their shopping behaviour. Nearly everybody communicates in some way through social media as well. You want customers to give you positive reviews on every platform so they and their followers will choose to purchase from your online or in-person retail shop. Accidents happen. They might order the wrong item, you might ship the wrong size, but a great returns policy is the perfect way to ease the pain of these negative experiences.
Luckily, there are a few ways you can ensure the return procedure is a positive experience. Though they seem lenient, leveraging the satisfaction of your customer against possible losses, you will find you still gain from these terms:
- Customers can return items without the original box or packaging
- Give full refunds for the item
- Accept returns without the original receipt
- Allow for a longer return window
- If the item was purchased online, allow for in-store return
- If the item was purchased in-store, allow for mail-in returns
2. Maximized ROI
In 2020, $428 billion in merchandise was returned for a total of 10.6% of total U.S. sales. The National Retail Federation reports that for every $1 billion in sales, the average retail enterprise saw $106 million in merchandise returns.
Looking at these statistics, it’s clear that maximizing your ROI on reverse logistics is all about efficient supply chain management. According to the reverse Logistics Association, reverse logistics can affect between 3 and 35% of a company’s bottom line. If your company keeps the percentage low, you have an effective method for returns management and are succeeding in maximizing your ROI.
3. Rapid Disposition
Having returned goods languishing on shelves for a lengthy period of time isn’t good for anyone. Without effective disposition, you are running the risk of major negative impacts to your bottom line:
- They are using valuable warehouse space
- Their value is not retrieved effectively
- The goods may be depreciating (electronics depreciate, clothing goes out of season, etc.)
If merchandise re-enters your inventory rapidly, or you succeed in retrieving the value of your products in a minimal length of time, you have optimized your returns process.
If the disposition of products is as far upstream as possible, you can maintain a healthy bottom line and keep your customers satisfied. Calling on the services of an experienced and efficient reverse logistics company such as G2’s management and disposition engine allows you to move more products quickly to their final destination. This efficiency keeps both freight costs and facility processing costs to a minimum and customers get credited quickly. As you know, a satisfied customer makes a loyal customer.
4. Organized Process
If you are familiar with Lean Methodology, then have heard about the 5Ss. Applying this methodology to return management can help you achieve optimal productivity. This Japanese productivity tool is based on efficient triage and disposition of your returns. Here are the key components:
- Sort: organize your returns using a process that will return maximal value
- Repackage or rehang and reshelve
- Repair – do they need parts and can re-enter the inventory?
- Refurbish and resell
- Disposal – sell to a secondary market, recycle or discard
- Set: the triage is orderly with the destination clearly labeled
- Shine: the work area is clean
- Standardize: standardize the process so all staff are following the methodology set in place
- Sustain: consistency is maintained throughout the process
5. Reduction in Returns
Top-notch customer service is key for brick-and-mortar retail. The first step is ensuring the product purchased by a customer meets their needs. The second step is providing service after purchase in case they need help with unboxing or set-up.
For e-commerce, clear product descriptions and consumer reviews will help the buyer make more informed decisions about their purchase. Give specifications like measurements and sizing tips, multiple views for product images, and provide any other information that will help the consumer imagine it in their home or in their wardrobe. This will go a long way in reducing the need for returns.
6. Data Collection
Retailers are recognizing how essential data collection is for the supply chain management. The need to know what is being returned most frequently, who is returning the most items (demographic, identity, location), how much is transportation costing, and why an item is returned are crucial data points for designing your reverse logistics supply chain.
Automation of the process of data collection is essential to acquire maximum information about merchandise returns. Using a data collection software like our G2 platform rules-based engine ensures that there is full transparency as products move in or out of your inventory.
7. Inventory Tracking
Streamlining inventory management is essential for efficient reverse logistics. You need information about what is done with these products: are they being returned to your inventory, refurbished, or repaired? When do they get back to the shelf or stock counts? Who is handling the product and for how long?
Once again, automation is the best way to get a full picture of the lifecycle of your products. Do you have a system that can inform you about the location of every item that was returned? Do you know at what stage this item is in the returns process?
Achieving Success in Reverse Logistics
No matter how you do business, via brick-and-mortar, online, or a combination of both, the goal is to have as few returns as possible. The reality is that returns are going to happen and dealing with the bewildering world of reverse logistics is a challenging yet essential undertaking.
Having a warehouse and team dedicated to your returns process is ideal for maximizing value. However, unless you’re operating at the level of Walmart – with more than 6 locations handling returns – it might not be cost effective to open a new location specifically for reverse logistics.
Instead, your best choice is to outsource returns management to be able to focus on sales and customer service. A third-party reverse logistics company can collect the data, deal with the merchandise, and devote the right amount of warehouse space. and help you optimize your bottom line. Discuss how we can help you focus on your business while we deal with your reverse logistics.