Free returns policies have been a hallmark of the pandemic, but that practice shrunk some this holiday season. January is the season of returns for retailers, and to minimize the loss, effectively managing the reverse logistics process is a must for bottom-line health. Estimates vary, but most retailers can expect to lose around half of their margins on returns when you add together the processing costs for both selling and returning. With the giant rise in e-commerce over the past several years leading to an equivalent rise in returns—double that of brick-and-mortar stores–supply chain managers need to develop strategies and technology to streamline the process.
Generous Returns Policies Going Away
When it comes to strategies, some retailers and e-commerce platforms are beginning to turn away from their generous return policies. Free returns policies have been a hallmark of the pandemic, but that practice shrunk some this holiday season as a way for sellers to recoup some of the costs involved in reverse logistics. Other policies that can help minimize returns include requiring that they come back with a receipt and being transparent about which items are eligible for returns.
While in theory, returned goods can be ripe for reselling, the reality is very different—fewer than 10 percent of returned goods make it back to store or e-commerce shelves. Instead, they often end up in liquidation or go to secondary resellers. Others receive refurbishment, repackaging or upcycling. Regardless, the extra handling leads to extra costs and/or losses. In extreme cases, some companies choose to avoid reverse logistics costs altogether, allowing customers to keep or dispose of the item they wish to return.
If you’re in retail and/or e-commerce, traceability is essential to minimizing your reverse logistics processes. Tagging and tracking will provide you with the visibility you need to return products to market better. When a product is traceable, you’ll know its location to and from the customer and more efficiently manage it as it returns through your warehouse doors. You can also gather valuable insights from the scanned tags. For instance, the size of an item of clothing might have been mislabeled at the originating warehouse—or the supplier of that item might have size-related issues. Knowing these facts can help you better work with suppliers to reduce future returns.
You can also up your game on the front end of sales by packing outbound shipments with intelligent labels. Focusing on your final 100 feet, or the scanning, labeling, applying, and manifesting (SLAM) zone with the latest automation, can reduce errors in shipping that can lead to unhappy customers and more frequent returns.
Reverse logistics is a necessary part of the e-commerce and retail experience. Your warehousing operations will likely be dominated by it over the coming weeks. While it can be a slow and labor-intensive process, you can minimize its pain and costs by employing the right strategies and technologies. Use the coming month to assess your returns policies, see how and where you might improve, and aim for more efficiency next year.
