Today, shoppers got used to order a certain amount of products that usually exceeds their financial possibilities and original expectations motivated by generous free-return policies or the popularity of ex post payment methods. The return-anything culture: order – receive – try on– decide (buy or return) has been established as a daily routine. As a consequence, retailers’ storages and warehouses are collapsing and the losses become a real headache. And then, some questions arise: What to do with such amount of undamaged items? How can return rates be reduced, and how can retailers take advantage of returns?
Assuming, there will be always returns, the focus is on reducing rates by the implementation of prevention measures and finding a way to reintegrate the returned goods into the inventory and get them ready to be resold as quickly as possible. How can reverse logistics be applied, to make the most profits of the remaining value of the returned item.
How can returns be reduced?
Many companies’ awareness regarding the importance of setting up strategies to reduce return rates, but also to effectively manage returns increases. In this sense, the 86% of German retailers consider a detailed product information in the website the biggest impact in returns, followed by personalized customer services (48%), faster delivery methods (44%) and secure packaging (38%).
Detailed Product Information
It is an everlasting-challenge to offer similar feelings and experiences digitally, when buying things online. For this reason, a detailed product description and an accurate picture of the product is a minimum requirement that can easily be improved by:
- Enabling zoom functions
- 360° views
- prominently show size tables and size calculations tools
- promote user generated content (USG) like customer reviews or product pictures (very common in Instagram and Pinterest).
- Check visibility of the customer service’s contact details and availability for personal assistance.
- Clear information about return and shipment policies
In some countries, the most used payment method is directly proportional to the returns rates. It is the case of Germany, where invoice is shoppers’ favored payment method. They pay after receiving the product at home. Many retailers introduced several new payment options like Paypal or credit card in the last years. Now, the tendency has varied and e-payments like Paypal or e-giro are the most popular between Germans (32%), followed by invoice (29%).
Another way to change this return-anything culture is promoting other payment options with vouchers or discounts. Some retailers offer discounts if you pay via prepayment, leading to more secure purchases, and, consequently, to reduced return rates and increased conversion. Bonprix for example achieves similar results by using vouchers or bonuses for every order without returns.
The better you know and analyse the reasons and motivations for returns, the better you can reduce rates and apply revert logistics: for this purpose it is interesting to conduct systematically surveys through an Online Return Center like Amazon is doing. One finding: A lot of customers missed their packages because they forget they should go to pick it up. It would be a good idea to use WhatsApp or SMS to inform customers about picking up the parcel.
What to do with such amount of undamaged items?
Another important approach that sometimes is behind the scenes is which way the returned products are taking after being rejected by their first shoppers. The majority of returned products are un-damaged and can be reintegrated as soon as possible into the supply chain. The challenge is being fast efficiently.
I would like to focus on some return management best practices to achieve this.
- The asset of tracking together with a warehouse management system (WMS), because it provides the automation necessary to maximize warehouse productivity.
- Data Synchronization using one source so that data repositories are updated with the very latest SKU information directly from suppliers.
- Use bin location to quickly locate products: as it is possible to locate products based on sales volume, thereby reducing the number of footsteps required to pick those popular items that tend to be on top.
- Track the number of times a product is picked from the inventory, because it is possible to reduce costs and efforts when a product is not really popular.
- Don’t mix multiple SKUs in a single bin location.
All these measures are important in order to optimize the reverse life cycle of the returned item. It is a fact that the traditional reverse supply chain is long and complicated, with goods traveling along. Many of these items lose their value along the way, and 30 % of them don’t even make it into the hands of another consumer, ending up in landfills.
Using technology to reintegrate returned goods
However many businesses are taking advantage of technology to save and increase efficient return processes. One of these examples is Optoro: a start-up company that aims to reduce the financial and environmental costs of returns. Optoro aims to offer retailers more direct and cost-efficient ways to sell their returned products through a software platform that tracks returns quickly, assesses which channel is the most effective for each returned item, and routes products to those channels. For undamaged products that have a high resale value, like baby goods, power tools or tablet devices, Optoro’s software might direct products to its own discount site, Blinq.com, which sells open-box goods at discounts.
On the other hand, some companies are even building their entire businesses around the growing consumer habit of buying online and returning unwanted items. Like the lingerie startup True&Co, who feeds inventory data into an algorithm to send customers five personalized bras. They are then encouraged to keep what they like and return what they don’t. Rent the Runway’s software algorithms keep track of over 65,000 dresses and 25,000 accessories. Its reverse logistics process is so efficient that it can send out 60% of returned dresses the same day they arrive at the warehouse.
In a nutshell, return rates are growing at fast speed as a consequence of the rapid pace of digital commerce. People are losing their fear to buy online and return unwanted items. The massive amount of returned products presents opportunities but also threatens should be taken very seriously into account by all the agents involved. On one hand, environmental-friendly policies and processes are needed urgently to be implemented, on the other hand, technology together with marketing is continuously developing solutions to change habits, optimize footsteps and bring efficiently back those items into the selling cycle because the good thing is that there is always someone who wants or needs those items.
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