Reverse logistics: streamlining the product return process
Try as you may, there’s no escaping the fact that product returns are just a part of doing business. In fact, the average return rate for most U.S. retailers is 16.5%, according to a report by National Retail Federation and Appriss Retail.
For sellers, reverse logistics can be trickier to navigate than traditional eCommerce logistics. However, with seamless execution, you not only have the chance to win back business, but also lay the groundwork for long-term customer loyalty.
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What is reverse logistics?
The term “eCommerce logistics” describes the interconnected web of processes that connect buyers with their purchased goods. If those products are returned, then reverse logistics kicks into action, guiding customers through the process of either shipping or bringing back their items for exchange, refund, or replacement.
Reverse logistics is far more complex than issuing a return shipping label. It usually involves:
Ecommerce technology - which enables customers to initiate returns through self-service links available on your online store
Customer service - which ensures that you have the staff and system in place to handle any return shipping issues or provide self-service content
Physical stores - i.e., your store locations could serve as facilities for accepting and handling returned items
Ecommerce warehousing - i.e., once items are returned to your warehouse, you’ll need to have the right processes and technology in place to receive, inspect and re-shelve or dispose of returned items
Marketing - i.e, to retain or win back customers, you’ll need to make sure that the return process is smooth and accessible, plus re-engage customers through personalized offers and other experiences
Why focus on reverse logistics?
A smooth reverse logistics operation is crucial to retaining customers. As eCommerce sales have grown, so has the number of customer returns—today’s average return rate of 16.5% is more than double the return rate prior to the pandemic: in 2019, returns averaged just 8.1% of total retail sales, Appriss found.
Given that well over one in 10 customers now return items, it’s worthwhile to invest resources into making the process run smoothly and satisfactorily.
A successful returns process can open the door to further transactions, whereas a poor experience can lead to poor reviews and a damaged reputation. Consultancy firm Accenture reported that effectively managed returns can boost profit-per-customer by 29%.
Returns aren’t the only reason to prioritize reverse logistics. Many modern business models use reverse logistics tactics—such as “try before you buy” services, recommerce operations, and rental businesses—to open up new revenue streams.
7 types of reverse logistics operations
Multiple situations can trigger the need for reverse logistics. As you analyze the performance of your existing systems and plan improvements, account for the following scenarios:
Customer returns - The average volume of returns can vary drastically from category to category. Apparel sellers typically struggle with the highest return rates, which can be as high as 25% online, according to consultancy McKinsey. Because size and fit are difficult to gauge when buying online, some customers resort to buying multiple sizes of the same item, then returning the ones that don’t work. This practice, called “bracketing,” inflates return rates, as does “wardrobing” (i.e., when customers return an item for a refund after a single use). A variety of categories outside of apparel are susceptible to wardrobing, ranging from home decor items (such as party centerpieces) to books, jewelry, and even appliances. As part of your reverse logistics operations, you’ll want to look for ways to detect these practices and flag potentially problematic returns.
Rental returns - Whereas wardrobing is a fraudulent method of borrowing new merchandise, legitimate rental-based businesses are purpose-built to handle this type of turnaround. For example, you might rent out fashion ensembles for black-tie galas, toddler bikes to new parents, or skis for the occasional hobbyist. Managing rental timeframes, inspecting items for damage, and tracking available stock require a complex back-end operation to ensure a seamless experience for customers.
Product recalls - If safety problems or defects crop up for existing products, you may need to issue a recall. When this happens, you’ll need to clearly inform customers on the process for returning, repairing, or exchanging recalled items. While recalls are rare, they can strain your reverse logistics operation with a wave of returns, so a contingency plan is essential.
Unsold merchandise - Inventory surged in 2022 when retailers over-compensated for supply-chain shortages during the peak pandemic years. As demand ebbs and flows, your inventory management strategy may lead you to return unsold merchandise back to manufacturers, allocate it to liquidators that resell at cut-rate prices, donate it, or hold it at the warehouse for the next season.
Repair and refurbishment - As brands launch sustainable eCommerce initiatives, you may feel the pressure of needing to extend the life of your goods for customers by offering repair, refurbishment, tailoring, upgrades, and other services. To achieve this, products need to be shipped back to store locations or service hubs, where they’re processed and then repackaged for return delivery.
Trade-in and resale - As recommerce surges, you not only have the opportunity to launch a secondary revenue stream. You also have the opportunity to rekindle connections with customers who are looking to turn in their used items. However, every trade-in or resale program requires a process for inspecting items and assessing their resale value.
End-of-life disposal - You can offer credits or rewards for customers who turn in worn out or used-up products for environmentally-responsible disposal, reuse, or repurposing. Tasks such as sorting and disassembling inbound merchandise and cleaning reusable packaging for refills add further steps to the reverse logistics process.
Best practices for optimizing reverse logistics
There’s no getting around it: reverse logistics is a complex undertaking.
While it can be daunting to identify how best to structure the layers of technology and interdependent processes involved, you can prioritize your efforts by understanding customer needs and expectations. Whether you’re a small business owner launching a new business or perfecting existing workflows, follow these steps to ensure that your reverse logistics operation is the best that it can be.
01. Take stock of existing patterns
Start by analyzing existing sales and return data, if available. Scour your website logs and transaction data for clues. Consider gathering information like:
Most frequently returned products, and whether your customers prefer to ship back or drop off returned items at stores
Customer service questions and feedback that your team frequently receives (are there any information gaps surrounding your current returns process?)
Second-hand sales on peer-to-peer platforms like eBay and Craigslist, which can indicate whether there’s an appetite amongst your customers for trade-in services
If you don’t have customer data to consult, study industry trends and competitor offerings. Or, gather further insights from trade publications and events.
02. Identify opportunities to reverse the returns tide
Returns are now routine, and you may even be encouraging them through trade-in and resale programs. But if new merchandise is coming back at a higher-than-average rate for your industry—or if specific products are returned more often than others—consider whether you can do more to avoid triggering reverse logistics. Possibilities include:
Help customers find a better size - Size and fit problems are the leading cause of eCommerce returns, according to research from Narvar. To curb the trend, provide comprehensive size information, like size charts and dimensions, to help shoppers sort through their options. Showcase and encourage customer feedback that include photos, videos, and ratings specifically for size and fit. You could even experiment with augmented-reality experiences, like Warby Parker does so that customers can virtually try on glasses.
Align expectations with reality - Offer realistic product photos and detailed product specs on every product page. Guide shoppers towards parts and accessories that are compatible with their products, in case they’re looking for something extra. Meanwhile on the back end, conduct quality checks to ensure that the products you ship out to customers exactly match their descriptions. Promptly remove any defective items from your stockpile. And consider placing test orders to evaluate whether product packaging is sturdy enough to prevent damage in transit.
Provide shipping timeframes up front - Gifts or other time-sensitive deliveries that arrive too late are likely to be returned, so you’ll want to clearly display estimated delivery dates prior to checkout. If a busy selling season is coming up, invite your customers to place their orders early to guarantee delivery by a certain date.
03. Evaluate packaging for return journeys
You should design your product packaging with reverse logistics in mind. Consider whether the product box, jar, or bottle can be reused, refilled, or recycled. The outermost shipping box or bag should be easy for customers to reseal and send back with a fresh label, should they want to make a return.
You may even want to consider using pouches or bins made of durable materials that are intended for multiple trips. For instance, Rent the Runway’s custom-made garment bags are made of material that’s similar to what’s used for soft luggage and have a plastic insert that makes it easy to swap in a new shipping label.
04. Devise an inspection protocol for returned goods
Whether you’re delving into the resale business or simply evaluating if you can return used products to store shelves, inspection is a crucial component of the reverse logistics process. Develop standardized evaluation criteria so that merchandise is handled in a consistent manner. Then, log inspection results for future reference. You could even post the evaluation report on product pages for resold items to reassure second-hand shoppers that each item is in good condition.
05. Evaluate fulfillment partner capabilities
Customers will hold you responsible for offering a smooth reverse logistics experience. After all, your brand is the one issuing the refund, trade-in credit, or exchange.
So, even if you outsource eCommerce fulfillment services and returns, it’s your job to take the lead. Make sure you know how your logistics partners manage—and charge you for—returned merchandise. If you’re planning to offer intensive capabilities, such as resale or refurbishment services, it’s even more important that you work tightly with your partners.
Depending on your partners’ capabilities and your business’ needs, you may want to add a dedicated returns management provider to the mix. You can search Wix’s App Market to connect with providers who specialize in return services, like AfterShip and Outvio.
06. Map and integrate back-end systems
Once you’ve set your offerings and sourced the technology, integrate operations so that data handoffs are seamless and efficient. Test different scenarios to uncover and resolve potential glitches proactively. The exact steps you take will vary depending on your business. But overall, your goals should be:
Visibility - You should be able to access information about specific products and their affiliated original orders at any stage of the returns process.
Accuracy - Inventory counts should be updated frequently to include returned merchandise that’s been added back to stock.
Control - Rerouting, expediting, and custom handling should all be possible.
Transparency - Customers should be able to check the status of their refunds or repairs and receive accurate, timely information.
07. Communicate, communicate, communicate
Provide clear and comprehensive instructions for customers so they can navigate the process as smoothly as possible. In particular:
Highlight return policies and exchange options at multiple points along the path to purchase. Evaluate whether your terms are competitive with others in the industry, and update the information whenever you add or modify procedures to ensure that your policies reflect current offerings. Don’t bury the policies in the “customer service” section of your site. Instead, link to them prominently from the shopping cart page and throughout checkout. Work with an attorney to translate dry legal jargon into language that shoppers understand.
Once your policies are set, promote their benefits. Highlight convenience: if items ordered online can be returned in stores and vice versa—or if you offer free recycling of old electronics when replacements are purchased—be sure to say so.
When you test reverse logistics scenarios, identify which steps are most appropriate to communicate in status updates and automate messaging via email or SMS.
Build business with reverse logistics
Navigating the complexities of reverse logistics can be a delicate dance. Investing time and resources into perfecting returns and refunds may seem like an expensive way to encourage unwanted behavior. However, well-managed reverse logistics can help your brand earn a reputation for customer-centric efficiency that will ultimately earn you sales and loyalty.
Allison is the editor-in-chief at Wix, with several years of experience reporting on eCommerce news, strategies, and founder stories.