Reverse logistics: the ecommerce returns challenge
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As a formal logistics term, reverse logistics covers all operations related to the reuse of products and materials. However, the growth of ecommerce has driven a focus on the consumer-based returns process in support of online purchased products.
The ecommerce understanding of reverse logistics is so important that, according to a recent survey, 96% of consumers were more likely to purchase from an online retailer if it offered free returns. Additionally, 91% of consumers said the ease of returns impacts their decision to shop with that retailer again.
Other consumer perks and preferences with respect to merchant returns policies include:
- Home pickup which is subject to an added charge.
- Conveniently located access points where a returns order can be easily dropped off.
- Receipt confirmation for dropping off a return order at an access point.
- Near immediate credit card adjustment on returned items.
Ecommerce related returns are on the rise with CNBC reporting that up to 16% of all online purchases were returned during 2021, totaling over $750 billion in merchandise cost.
Why Are Returns Problematic for Merchants?
Consumer driven returns are a huge problem for both traditional retailers and on-line merchants. However, the cost of managing and processing returns is much higher for the ecommerce merchant versus the traditional retailer:
- Returns tend to be lower for store purchased products as the consumer can feel and see the product prior to purchasing.
- Traditional store retail purchases tend to be directly returned to the store and do not usually result an individually shipped return item to an ecommerce merchant or 3rd party processing center.
- Consumers purchasing apparel on-line are more inclined to order multiple items so they can choose from a selection of items and then return the unwanted items.
Reducing the Cost of Returns
So, how can an online merchant reduce the number of returned orders and lower the cost of managing and processing customer returns?
- Identify bad customers that have a high number of returns and charge those customers for excessive product returns or simply fire such customers as not all customers are good customers.
- Reward customers with a history of fewer returned orders.
- Negotiate the lowest possible shipment rate for return transportation with your parcel carriers and link the overall carrier business relationship to aggressive returns shipment rates.
- Look to 3PL’s with a focus on returns shipments to manage the returns process.
- Consider a 3PL based consolidated returns process that may extend the returns timeframe, but also reduce transportation expense.
- Institute a modest sustainability returns charge to the consumer and link that charge to an overall sustainability strategy, which environmentally conscious customers will understand.
As we face a slowing economy and possible recession, ecommerce merchants need to prepare for possibly flat or even negative growth. In such an economic environment, all costs must be evaluated for reduction, and reducing the overall cost of managing the returns process must be a priority for all online merchants.
Is reverse logistics a pain point for your ecommerce operation? Newegg Logistics RMA team is on hand to manage your customers’ return items for you. Tell us your needs, and we will customize a cost-effective reverse logistics solution tailored to your business.
Dean Maciuba is the Co-founding partner of Crossroads Parcel Consulting and contributing editor to the Newegg Logistics blog. This content has been republished with the permission of the author and Newegg Logistics, where the article originally appeared.