For decades, retailers have dealt with a slew of post-holiday returns. Before the advent of e-commerce, retailers simply beefed up their returns department to deal with the long lines of unhappy consumers returning unwanted ties, ill-fitting clothing, or other unwanted items. Today, things are more complicated and returns are increasing. Ahead of the 2020 holiday shopping season, Ken Bays, Vice President of Product Development at Inmar Intelligence, observed, “Holiday shopping is always a big time for returns.”[1] He went on to note that “shifts in shopping habits during the COVID-19 pandemic are raising questions about what holiday returns will look like.” With COVID-19 still a problem heading into this year’s holiday shopping season, returns are again going to present a challenge for both online and brick-and-mortar retailers. Those challenges may be exacerbated due to the current sorry state of supply chains. According to journalist Elaine Dopson, “Data suggests that 20% of online-bought products are returned, compared to just 9% of items bought in a brick-and-mortar store.”[2]
In times past, items returned to a store were often inspected and placed back on store shelves for resale. Today’s complicated returns processes more often than not involve reverse logistics, which can be a real headache for retailers. Ryan Semrow, Product Owner for Reverse Logistics at C.H. Robinson, explains, “Reverse logistics refers to any portion of the reuse of products and materials in a supply chain. True to its name, reverse logistics flows across the supply chain in the opposite direction of standard logistics. For instance, unsold goods being sent from a retailer back to a distribution center or the manufacturer would constitute reverse logistics. Customer returns also fit this definition and make up a large percentage of reverse logistics concerns that retailers and logistics organizations handle. Often, retailers consider a product’s supply chain to be complete the moment that it is purchased or received by a consumer. But this isn’t always the case. If a consumer returns or exchanges a product, it re-enters the supply chain. Sometimes, in the instance of broken, damaged, or otherwise unusable goods, it may need to move several links backward in the supply chain to be repaired or recycled.”[3]
Return Strategies are Becoming More Important
Because the digital path to purchase can easily be abandoned, retailers understand that a good returns policy can be a competitive differentiator. Sanaz Hajizadeh, Senior Product Manager at Happy Returns, explains, “When customers know that they can get their money back just as easily as they can spend it, they’ll shop with more confidence and spend more.”[4] Promising a consumer that an item can be returned and making it easy for them to do so are two different things. That’s why having a world-class shipping strategy is important. Constantinos Garoufalidis, a content provider at FreightCenter, writes, “Really effective shipping strategies are not as simple as just sending your products from point A to point B. The most effective shipping strategies also include reverse logistics and return policies to help retailers make the most of their budget while keeping their customers happy even during a return or exchange.”[5]
“Unsurprisingly,” Dopson writes, “the number of returns mirrors peak ecommerce sales periods.” Also unsurprising she adds, “The holiday season is the most popular time of year for online shopping.” Here’s the kicker. Dopson reports, “A quarter of holiday shoppers buy items with the intention of returning them at a later date. Whether it’s gifts a friend doesn’t like or trying to reclaim some money they spent in a holiday-inspired splurge, it’s why ecommerce brands receive the most returns throughout December, January, and February.” With so many consumers intentionally purchasing items they know will be returned, smart retailers understand how important returns policies can be. Just as importantly, they must have in place a reverse logistics strategy that doesn’t break the bank. That’s why Garoufalidis insists, “It’s important to have a separate reverse logistics strategy in addition to your traditional supply chain protocol.”[6] He asserts a good reverse logistics strategy has three parts. They are:
Part 1. Returns Policy. Garoufalidis writes, “Have all your bases covered when it comes to how your business handles returns. Make it clear what is returnable, a timetable for returns, who’s responsibility it is to ship it back, and where product needs to be sent to.” As I will discuss in the next installment of this article, there a number of returns options now available to businesses.
Part 2. Repair processes. “As mentioned before,” Garoufalidis writes, “cargo like manufacturing or automotive parts can be fixed and resold. Salvaging value off items in the reverse logistics chain is the purpose of reverse logistics for businesses, so have a repairs process in order.”
Part 3. Disposal. Garoufalidis notes, “Some products can’t be salvaged. Their cost to repair or reuse is more than the value the product can give you. This is where recycling comes into play, and where you can make your supply chain sustainable and rid it of excess inventory and costs.”
Garoufalidis recommends partnering with a shipper that can help you with both your main supply chain strategy and your reverse logistics plan.
Chuck Johnston, Chief Strategy Officer of goTRG, reports, “Sixty-seven percent of all consumers look at the returns policy before purchasing. Many will forgo a retailer altogether if it doesn’t provide a seamless returns experience. In a recent survey by reverse logistics software company goTRG, 78% of consumers said returns shipping costs and restocking fees could prevent them from purchasing. In addition, 50% indicated that short refund windows would make or break their decisions. Nearly a third said having to print a label or repackage an item was inconvenient enough to take their business elsewhere. Simply stated, convenience is the number-one factor that consumers consider before choosing where to shop — and especially when making online purchases.”[7]
Concluding Thoughts
According to Johnston, “The uncalculated cost of losing customers due to poor returns experiences, along with the $150 billion-plus net returns cost issue, means retailers must tackle their reverse logistics process and returns policies simultaneously.” In the concluding installments of this article, I will discuss expert recommendations about how you can make your returns and reverse logistics strategies world-class.
Footnotes
[1] Ken Bays, “Holiday returns 2020: Online shopping, returns higher than ever,” Supply Chain Dive, 26 October 2021.
[2] Elise Dopson, “The Plague of Ecommerce Return Rates and How to Maintain Profitability,” Shopify, 25 August 2021.
[3] Ryan Semrow, “What is Reverse Logistics and How Can It Help Your Supply Chain?” C.H. Robinson Blog, 18 May 2021.
[4] Dopson, op. cit.
[5] Constantinos Garoufalidis, “Using Reverse Logistics to Increase Customer Satisfaction,” FreightCenter, 12 November 2020.
[6] Constantinos Garoufalidis, “What Is Reverse Logistics?” FreightCenter, 11 August 2020.
[7] Chuck Johnston, “How Retailers Are Bettering the Online Returns Experience,” SupplyChainBrain, 4 August 2021.
