Throughout the pandemic, online shopping became the new norm for almost all retailers. This includes the kinds of products that shoppers have generally preferred looking at in physical stores.
Shoppers have been getting increasingly comfortable buying items they’ve never laid eyes on before. As a result, merchants are handling more product returns than ever. As such, it’s no wonder the demand for reverse logistics is on the rise!
Effective reverse logistics can lead to better customer satisfaction, and as a result, improve your bottom line. It also ensures that, whenever possible, products are re-used rather than wasted or thrown away. This goes a long way to benefit the supply chain, the circular economy, and the environment.
Many investors are applying environmental, social, and governance (ESG) factors when identifying material risk and growth opportunities. As a result, reverse logistics have become a significant talking point. In light of all that, we’re talking about how ESG influences reverse logistics and how an adequate returns solution could save you costs.
There’s lots to cover, so let’s dive right in!
What’s ESG and How Does It Apply to Returns?
ESG stands for ‘environmental, social, and governance.’ It’s an investment term often referred to as sustainable or socially responsible investing.
Non-financial factors like this are becoming increasingly important to investors. This is an essential step towards a more sustainable economic future and it also ensures that businesses aren’t wasteful with their resources.
This has financial impacts. Businesses that don’t control the waste in their supply chains are losing money. The returns process is often an area that can lead to high waste streams.
The goal is to establish a circular economy where products are made to be used again. This principle inspires long-term resilience. It enables businesses to grow their customer satisfaction and their profit opportunities.
The Struggle with Reverse Logistics
E-commerce merchants need to streamline the returns process and meet its challenges. In 2020 alone, roughly $102 billion worth of e-commerce products were returned.
This number is projected to grow significantly over the next few years.
Reverse logistics is not the same as forward logistics and presents unique challenges. You’re not transporting pallets and bulk boxes of the same product. Instead, businesses have to handle many extra items being returned in small quantities with various sizes and shapes of packaging.
Also, when these items are in transit from the customer back to the company, it’s impossible to refurbish stock or update inventories.
Common challenges businesses face when handling returns include:
- High cost of reverse logistics
- Inability to understand why returns occur
- Poor visibility into products received back
- Inadequate resources for handling returns
Most important when considering ESG is the fact many returns have an environmental impact.
Many retailers struggle to get returned items back into stores. As a result, they end up in landfills instead. In the US alone, returns constitute five billion pounds of landfill waste.
So how can a returns strategy avoid these challenges? Also, how can it contribute to a more circular economy?
Establishing a Circular Economy through Reverse Logistics
The right software solution will empower you to make reverse logistics more sustainable. A better returns process can help a brand and the environment.
For instance, it generates more customer referrals and grows the resale value of returned merchandise. In other words, it benefits both your customers and your bottom line.
There are two ways to approach reverse logistics more effectively:
- Reduce the cost and impact of unavoidable returns
- Use analytics to avoid returns for example using fit or sizing feedback to improve product and or description
5 ways Reverse Logistics Technologies can help :
1. Automatically Sorting and Redistributing Merchandise
The right software can intuitively return merchandise to your inventory. You’ll reduce the cost of the process by reducing the friction in warehouses when returned items need handling.
This means fewer items are discarded in landfills, and the merchant can still make a profit on returned merchandise.
2. Tracking Returned Items
By enabling tracking on returned items, suppliers can anticipate when things will be back in stock for resale. They’ll have an accurate picture of the volume and nature of returns.
3. Data to Identify Return Trends
Software should aim to identify why returns occur and identify pain points in the customer experience. This helps merchants build better customer satisfaction, and it can avoid unnecessary returns.
Analysis might find that certain products are frequently faulty or not as expected. This enables sellers to change product descriptions. They can better find ways to improve in the future, so returns don’t occur in the first place.
4. Lower Cycle Times
The right software can reduce transportation costs and the environmental impact of transport. It can dynamically route returned merchandise to the best channels and locations allowing you to disposition it more quickly.
5. Quality Assurance
A better returns system can execute rule-based product inspections. This ensures items are in good condition to be shipped out again.
Finding the Right Reverse Logistics Solution for ESG
To achieve reasonable customer satisfaction, businesses have to offer returns. This is especially so in the current economic climate, where customers rely on the security of returns to make buying decisions.
Empirical data and automation can improve reverse logistics for a more sustainable approach. As a result, both environmental and financial wastage is kept at a minimum.
As such, it’s an essential factor for ESG investment and crucial for enabling a more circular economy.
A returns solution like G2 can help your business generate more profit out of your returned merchandise. We enable you to track all returns and reduce cycle times.
Our software also identifies the causes for returns and helps you streamline the reverse logistics process. Contact us today to find out more!