Reverse logistics is the movement of a product upstream from the customer back to the retailer; and when purchases increase, returns also naturally increase.
We are just coming off a very busy holiday shopping season with record spending, and record returns have been on its heels. According to UPS, they are “on track to process more than 60 million return packages between November 14, 2021, and January 22, 2022 — a 10% increase over last year.”
Best Practices and Examples
For any company, big or small, returns are a large undertaking, and if not handled correctly, can have a significant impact on your income. Many companies strive to make the returns process painless for customers to improve their customer experience and even encourage further spending down the road. Zappos, for example, has a very generous return policy that allows customers to return qualifying items within 365 days of purchase for a full refund. Zappos customers are surely thankful for the lenient policy; however, anyone in supply chain who sees the word ‘free’ knows that someone is absolutely paying for it.
Companies should focus on making returns both painless for the customer and wallet friendly for themselves. Although eliminating the cost of returns is impossible, some companies have become creative and even partnered with other retailers to mitigate costs. Amazon, for example, allows returns to be accepted in-person at Kohls locations. Amazon still must collect, evaluate, and either dispose of or remarket the product after it is dropped off, but pre-paid postage and other potential costs are mitigated.
Major retailers like Walmart, Target, and Amazon have an even newer approach to returns: no returns at all. This approach does not apply to all products, but namely products where it would be more expensive for the item to be returned, evaluated, and then either disposed of or resold. This not only eliminates huge amounts of low-value products from the reverse supply chain, but also saves companies a significant amount on shipping.
Companies have even been using this strategy to encourage giving from customers. Several reviews for Chewy, a pet food and supply online retailer, noted that instead of having a customer return an incorrect item or an item that was the wrong size, the customer was fully refunded and then prompted to donate the item to an animal or shelter who could use it. In this case, Chewy wins by contributing positively to society, the customer has a positive association with Chewy because it facilitated their donation, and Chewy ultimately saves on potentially huge return logistics costs.
Overall, returns should be seamless for the consumer, customer service should be ready to answer customer questions and solve problems to diminish the number of returns, and businesses should have a plan on how to most efficiently take in returns, evaluate them, and then either dispose of or re-market the items.
For companies looking to shake up their reverse logistics, get creative! Always make sure that the process makes sense for your bottom line, but also look for ways to make a positive impact with your customers and community.