The holiday shopping season has arrived! Ecommerce is a booming industry and companies are stepping up and getting their products and gifts to consumers faster than ever before. Unfortunately, that’s not the end of the line for companies. Today, between 10-40% of products bought online are returned to the retailer. So, with increased holiday shopping comes an increased need for reverse logistics.
Having efficient returns processes and clear policies in place before the holiday boom is vital to meeting ecommerce customers’ expectations and building your brand’s reputation online and beyond.
This is where the challenge begins. Returns during the holiday season can be tough for even large, well-established retailers because with returns comes increased shipping costs, disruptions in warehouse operations, and questions of what to do with returned products. When leaders understand the challenges that are associated with reverse logistics and implement effective mitigation strategies, many of these issues can be reduced. This enables top-notch customer service at every stage of the customer relationship.
What is reverse logistics?
‘Reverse logistics’ is one of those buzzwords that can be thrown around with some frequency and often is not well defined. Broadly, reverse logistics is any movement of goods back “up” the supply chain. Typically, reverse logistics refers to the return of goods. This means a product moves from the end consumer back to a distribution warehouse or retailer. Then, the retailer prepares to resell, recycle, or dispose of the products. This is reverse logistics.
What are the 5 R’s of reverse logistics?
A key to reverse logistics running smoothly is to understand the five Rs of reverse logistics. The five R’s are returns and exchanges, reselling, repairs, recycling and disposal, and replacements. We’ll discuss what the five R’s are and metrics to ensure the most efficient procedure possible.
#1 Returns and Exchanges
Processing returns and exchanges is the most important part of the reverse logistics process. Having an efficient process of handling returned products boosts customer satisfaction, can reduce the costs of returning merchandise, and helps identify ways to improve your products.
The first step of returns and exchanges is to have a well-communicated return policy. Then, figuring out the logistics of getting the product back to your company in the most pain-free way possible. This will often include providing a prepaid shipping label to your customers, whether printed out and included in the box they receive their package in or via a link that can easily be printed. Rate shopping can help you find the best rates for the specific return parcel so that you save money. Additionally, having a customer service team in place to coordinate exchanges will be vital for this step of the process.
The key performance indicator (KPI) to track the success of your returns and exchanges program is the rate of returned items. Knowing which items are most often returned will help you identify faulty products, indicate which product descriptions need updating, and instances that follow on support could be offered for specific SKUs. Over time this will ultimately reduce the number of returns and exchanges your business incurs.
Once you’ve received the returned products, identifying which products are unused, undamaged, and in perfect working condition allows you to resell them. This step, unfortunately, takes manpower and a lot of time. You will need a dedicated team for receiving, unboxing, inspecting items, and preparing items to be sold again. An important part of this step is adding undamaged returned items back into the ready-for-sale inventory.
The KPIs to keep in mind for this step are the value of the products being resold and the cost of time processing each item. Knowing these will help a business prioritize the processing and make the decisions that make the most sense monetarily and timewise.
There will be some returns for products which were defective upon arrival or broken in transit. Sometimes customers will just want their product fixed and sent back to them and other times the repairs will allow you to resell the product. There may also be times that monetarily it makes the most sense to allow the customer to keep the broken product and ship them a new one. Just like reselling, repairs take time and money to do. Knowing which SKUs make sense to repair is vital to having an efficient reverse logistics procedure.
The KPI to keep your eye on for this step is the cost of repair. Knowing this allows a business to make the best decision to either continue repairing a specific SKU, replace it when damage occurs or use a different method. Shipping insurance may be one effective way to reduce the cost of damaged items and may be especially helpful for high-value SKUs.
#4 Recycling and Disposal
Some returned items will be beyond salvage. In these instances, recycling and disposal will be required.
Making sustainable choices with disposal of these items is becoming increasingly attractive for consumers. According to a study conducted by global strategy and pricing consultancy Simon-Kucher & Partners, 66% of US consumers rate sustainability as an important purchase criterion for both their in-store and online purchases. So, if recycling of materials is possible for these items, it can be both beneficial for the globe and make your business more attractive to consumers.
A KPI to keep track of to be able to market recycled products is the amount of material being recycled versus disposed of by traditional methods. This does two things. First, it allows analysis of the most cost-effective disposal choices and second it allows for your business to better know the impact of your sustainability efforts. This information can be used to attract customers who value sustainability when choosing a retailer.
Sometimes the customer orders the wrong product, or the color isn’t quite as imagined. Whatever the reason, there are occasions when providing a replacement for an order is the best way to provide exceptional customer service. Giving customers seamless return and exchange options can improve the customer experience, increase retention rates, and boost your bottom line.
Like the KPI for returns, keeping a record of the most exchanged items helps your business identify if specific products, their online descriptions, or their photographs are not meeting customer expectations.
As the weather cools, ecommerce sales heat up! This is a great growth opportunity for businesses but, if reverse logistics procedures are not in place, poor returns experiences can damage a business’ reputation. Having a strong grasp on the data for each of the five R’s KPIs, a strong distribution network, and efficient warehouse technologies are the tools that are going to help you have a successful peak season.
iDrive Logistics offers cutting-edge technologies, a network of efficient, well-placed warehouses, and a team of transportation advisors available to help your business find its stride in the ecommerce landscape. If you would like to learn more about our technology solutions or holistic approaches, reach out to us through LinkedIn or check out our website.