Managing the returns process has long been an afterthought for many retailers, manufacturers, and fulfillment companies, but it may finally be getting the attention it’s due, given the supply chain challenges and accelerating e-commerce activity of the past year. Industry observers say more companies are catching on to the importance of a good returns process these days—one marked by clear policies, smooth processes, and greater visibility across inventory networks and IT (information technology) systems.
“Returns are becoming a more important issue across all stakeholders due to the volume increase of e-commerce orders. Whether B2B, B2C, 3PLs, or pure-play brands, the current returns process is too manual and complex to effectively scale with the increased volume of returns,” explains Gaurav Saran, founder and CEO of returns management system (RMS) technology platform ReverseLogix. “Returns have become so mainstream now [that] most organizations need to think of a returns management system as part of their toolbox. Volumes are so high, and that will continue to be the trend.”
Tony Sciarrotta, executive director of the industry trade group Reverse Logistics Association (RLA), says cost is a driver as well.
“The cost of all of these returns used to be hidden in many different silos,” including transportation, customer service, and sustainability, with no high-level view of the end-to-end cost of a return, Sciarrotta explains. “Now, because of volume, companies are starting to see that they are paying more to ship goods back than [those goods are worth]. It’s a complicated world, and I’m glad that more people are paying attention to it.”
Roughly $450 billion worth of goods were returned in the United States in 2020, according to Saran and Sciarrotta, who cite widely accepted industry statistics. About 8% of brick-and-mortar purchases are returned, a figure that more than triples for online purchases to an average of 30%, they said. Those numbers are only expected to increase, creating an even greater incentive for sellers to get a better handle on the problem.
A good returns process is critical to getting and keeping customers, especially in retail—and that’s another reason reverse logistics is taking on a higher profile. A survey of more than 1,000 consumers this past fall found that nearly 40% said they won’t buy a product online if they can’t find the return policy. The research, an annual consumer returns survey conducted by retail technology platform Narvar, also found that three-quarters of first-time shoppers who had a positive returns experience with a retailer said they would shop with that retailer again based on the experience.
Essentially, a better returns experience contributes to a better overall customer experience, which is another important aspect of addressing the reverse logistics challenge.
“Returns don’t occur because people buy stuff they don’t want. Returns occur because of a bad customer experience,” Sciarotta says, adding that much work remains to be done to improve the online buying experience so that fewer items are sent back. “Reducing the amount of returns is related to improving that customer experience—tell people what they are going to get and deliver what you promise them, and you will reduce returns. Make their experience so great that they will not only love what you send them, but they’ll go on Facebook and tell people about it.”
Even if companies are already working to improve service and reduce returns, they are likely to face a flood of incoming items this post-holiday peak season—due largely to accelerating e-commerce activity. Beyond those problems are even deeper issues that are complicating the returns environment, according to Terry Neidiffer, senior manager, solutions design, for third-party logistics services provider (3PL) Ryder System Inc. A labor shortage and the associated cost increases are making it difficult for DCs to process higher returns volumes, for example. And for some companies, materials shortages are hampering efforts to automate DC operations in response to those challenges.
“While there are options for automation, most equipment vendors are backlogged more than double what they historically have been. Additionally, a shortage of raw materials such as steel and computer chips is impacting the manufacturing and cost of automated equipment, which makes it much less deployable for many,” Neidiffer explains, adding that the post-holiday returns season will be tough for many to manage. “Unless a company planned to invest in its returns area many, many months ago, the ability to now impact the process is very limited.”
Limited, but not impossible. Training is one card companies can always play, Neidiffer says, calling it an often overlooked and simple way to maintain processes, service, and efficiency. Cross-training “forward logistics” associates—those involved in regular receive/pick/pack/ship operations—to handle returned goods is critical, as is training all employees on the triage and disposition of returned items so the process moves effectively, without rework and waste. A clean and accurate returned merchandise authorization (RMA)—a mechanism companies use to track returns—is also essential, he says.
“From a technology standpoint, RMA ‘cleanliness’ and accuracy is the single biggest driver of returns efficiency from a general units-per-hour standpoint. Assuming an employee has a clean, well-presented RMA that is easily credited back and dispositioned through technology, the process will move quickly,” he says. “However, [the need for] RMA research, having to cross-reference orders, and other issues will quickly cause a reverse process to stall. Well-built triage software that allows configuration by SKU [stock-keeping unit] and product type is the single best technology investment in returns.”
Saran urges organizations to take a step back and ensure they have clear returns policies that are well communicated to customers—and that employees understand the complexity of the returns process, which is highly dependent upon product type, seasonality, geography, and other factors. The return of an electronic device may involve triage, testing, and other steps, whereas the return of a book may be more straightforward, for instance. A winter jacket may need to be returned to inventory more quickly than a pair of sneakers. Clear policies and procedures form the baseline from which good processes and technologies can be applied, the experts say.
And when it comes time to adopt technology, Saran says companies should first visualize and be clear about the current state of their process and where they want to improve.
“Then look at evolving that process and making it smarter and more intelligent,” he says, emphasizing the advantages of applying an end-to-end RMS—software that can integrate with existing enterprise resource planning (ERP) or warehouse management systems—over more piecemeal approaches. “One central platform can enable a variety of strategies, from cradle to grave.”
Technology solutions can also help provide greater visibility across your inventory network, which is critical to managing the returns process, adds Brenda Stoner, founder and CEO of last-mile delivery service Pickup, an asset-light company that handles delivery of big, bulky, high-value goods for retail, commercial, and industrial customers. She advocates for a “singular view of inventory” that allows for greater flexibility in the returns process, meaning that customers can return items in a variety of ways—via an app, in the store, to another location, and so on. That ability is increasing as more companies digitally transform their businesses, she says.“Without digital transformation and that singular view of inventory, [it’s hard to solve] for the returns problem,” Stoner adds.