January 21, 2019
As e-commerce grows, so does the amount of stuff that gets returned. It’s almost become part of the online shopping process. We buy multiples of things knowing some or most of it will get sent back using the return shipping labels many companies provide inside the box or online.
The return process is now so important that many online customers consider an e-retailer’s return policy before placing an order. Those companies that don’t offer a simple way to send products back lose business. No longer can return logistics be an afterthought for retailers that want to stay competitive.
According to a study by the USPS, online purchases are three times more likely to be returned than those made in a physical store. And for the first year ever, National Returns Day, which is observed annually by UPS, occurred prior to Christmas in 2018, reflecting just how deeply e-commerce is transforming the retail supply chain.
Coresight Research estimated e-commerce would capture almost 16% of all retail sales in the final quarter of 2018. When there’s growth on the outbound, there is naturally going to be increased inbound activity.
Many shoppers believe that returned items simply travel back to retailers the same way they came, but that’s not always true. The real world of reverse logistics is complicated and can have negative ramifications for retailers and customers alike.
Warehouse Logistics. While front-end strategies focus on delighting customers, back-end reverse logistics focuses on increasing efficiency, cutting costs and optimizing the value of the returned product.
Reverse logistics is more expensive than forward logistics, primarily because of labor and shipping costs. Return packages must be collected, shipped to a returns center, opened by hand, inspected, classified, repaired if necessary, repackaged, distributed to the next sales venue, and restocked. Businesses are adding workers, increasing warehouse space, and establishing separate departments just to handle e-commerce returns.
It will take nearly 28 percent of businesses approximately two weeks to add a returned item back into inventory, according to research by Shopify. And the longer a product takes to be resold, the greater the chance that it goes out of date or depreciates so much that it is no longer profitable to sell, making it more likely to end up in the trash.
Sustainability. Twenty percent of e-commerce returns occur because of damaged products. When the damaged item is returned to the fulfillment facility, it will be set aside until someone can decide if it's going back for repair and refurbishment, or if it's being junked for parts or being junked all together. About five billion pounds of returned items, not to mention the waste from packaging materials, end up in the trash; making returns a major component of landfills.
There’s an environmental cost from damaged and returned goods that adds up fast when goods have to make multiple journeys, and it takes multiple manufacturing cycles to fulfill the same order.
Assuming a company’s average damage rate is just one percent (considered admirable by most standards), 48 percent, which is almost half of the total environmental cost of shipping, comes from damage. In total, the item must be made, packed, shipped, return shipped, made again, packed again and shipped again. This repeat process also doubles the packaging materials and manufacturing consumption needed to remake the product.
Customer loyalty. Some returns are unavoidable: Customers change their mind and sometimes are not satisfied with their purchase. Today, shoppers are more dependent on easy returns than ever before, buying multiple items online with the intent to return some of them. How easy or how hard retailers make those returns can make or break fragile online relationships.
Fifty-eight percent of shoppers are increasingly not satisfied with the ease of making returns. But for companies that get it right and make the process simpler, 72 percent of shoppers are willing to spend more and buy more frequently.
But how can you make the returns process simpler for online shoppers and fulfillment centers? An easy return process starts with correct packaging and can help earn and retain customers.
Returns are the new normal and central to the customer experience, but many retailers haven’t figured it out yet. The time is now to start thinking about packaging’s role in optimizing the returns process. Packaging that has return logistics built in to minimize shipping costs and complexity will help to retain customers and make life easier on the fulfillment side.
One of the best ways to ensure customers have as much confidence in a company when it comes to returns as it does with deliveries is the ease in which the delivery receptacle can become the return receptacle. Most online shoppers seek reusable packaging that can be resealed easily. When it comes to secondary packaging, special boxes with retention and suspension capabilities can be used for returns. Tear strips, which aid in the return process, can be incorporated into mailers and polybags.
During the fulfillment process, companies can include a prepaid return label inside the shipping vessel along with a diagram on how to prepare the package for the return and an insert card printed with the company’s return policy.
Companies that make the return process an integral part of the customer experience will attract more shoppers. These days, online consumers seek full retail services, not just delivery services.