E-commerce Returns Are A Major Challenge To Retailers

CNBC called returns a $260 billion “ticking time bomb,” in terms of the billions that retailers face each year handling unwanted, used or damaged goods. That’s a dramatic shift away from brick-and-mortar era when customers did most of the legwork, and employees could process the transactions in less than a minute.

E-commerce has flipped the paradigm and with giants like Amazon.com and Walmart.com transforming online retail into a virtual changing room – customers are growing more comfortable simply returning clothes that they don’t like, or that don’t fit. According to the Reverse Logistics Association, the average return rate on in-store purchases is about 8 percent. For e-commerce, the rate jumps to between 25 and 40 percent.

Managing that surge in two-way traffic can be a nightmare for smaller businesses

This time around, managing those shipments and paying for them falls onto the shoulders of retailers. That’s easy enough for established e-commerce companies, thanks to their extensive and sophisticated logistics operations, but managing that surge in two-way traffic can be a nightmare for smaller businesses, especially ones that are just now venturing into the realm of e-commerce.

Some Companies Are Looking Askance At Those Costs

In 2016, research from Barclaycard found that six in ten retailers were negatively affected by the growing costs of people returning items that they bought online. Online-only businesses were hit the hardest, with 31 percent telling Barclaycard that managing returns was hurting their profit margins.

Some businesses are even raising prices to cover the costs of returns, but that’s not a long-term strategy for success

Some businesses are even raising prices to cover the costs of returns, but that’s not a long-term strategy for success. Other businesses are getting out of online retail altogether, turned off by the volume of returns. That’s because on an individual level, it is incredibly hard to compete with the logistics outlays of major online retailers.

What Changed?

Amazon started the trend, turning its platform an easy-return zone. That means no questions asked returns, inducing buyers to add products to their shopping carts that they wouldn’t purchase with a no-refunds policy. That’s translated into more sales, but it’s created a headache for companies that operate in the Seattle retailer’s shadow because now, consumers expect the same thing from other retailers.

This trend is especially pronounced in fashion, where customers deliberately order far more items than they pay for, but its spread throughout the market.

Clicking That “buy” Button Sets Off A Mind-boggling Chain Of Logistics Transactions

The process of e-commerce tends to work best as a one-way street, with automated systems built to speed products to consumers as quick and cheap as possible. But e-commerce has given its customers a stake in the supply chain process, and today, they demand the same speed to reverse the process. Customers want that resolution and refund, fast.

A well-built and highly-transparent return management process is critical for two reasons. It reduces costs, allowing companies to grow margins on their online sales, and just as importantly, it keeps customers engaged and happy.

Keeping them informed and happy is critical to generating return business.

Until the return is processed, the customer is out the cost of their purchase, and the company is out the cost of transporting and processing the return. Nobody’s winning in that scenario, so the sooner the retailer can process the return, the better. And while that’s going on, the customer has a right to know where their product is, and when it’s going to be processed. It’s their money after all. Keeping them informed and happy is critical to generating return business.

To avoid tying up resources in a bloated logistics operation, companies need to revisit their approach to customer support and returns

Simply put, it’s relatively easy to sell goods online. There are scores of solutions for smaller companies, and larger ones have their own logistics operations. But far fewer companies can efficiently handle those pesky returns, despite the fact that they are an increasing part of online retail these days. To avoid tying up resources in a bloated logistics operation, companies need to revisit their approach to customer support and returns, and provide full transparency throughout the whole returns and claims process, to ensure high customer satisfaction rating.

Streamlining the Process

It’s important to understand and analyze returns to the granular level, leveraging that data to streamline future returns and ultimately, make sales more profitable.

The logistics experts at BlueGrace review historical shipping data to increase profit, cut labor costs, and keep the online customers loyal to brands by streamlining both the buying and returns process that underpins e-commerce in 2017. It’s important to understand and analyze returns to the granular level, leveraging that data to streamline future returns and ultimately, make sales more profitable. BlueGrace Logistics offers complete, customized transportation management solutions that provide clients with the bandwidth to create transparency, operate efficiently, and drive direct cost reductions. For more information on how we can help you analyze your current freight issues, feel free to contact us using the form below:

 

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