Reverse logistics is now a vital aspect of modern retail. The number of items returned by consumers is increasing at the same time as customers’ expectation levels and desire to reduce carbon footprints grow.
This means that the process of managing returned goods has become a much more pressing challenge for retail brands and retailers. It’s no longer sufficient for reverse logistics practices to simply work - they need to go beyond returning or replacing a product.
Instead, reverse logistics needs to be innovative enough to build and maintain brand loyalty, avoid unnecessary financial losses, and contribute towards sustainability goals.
With a thorough returns management strategy, retailers can overcome many of the critical challenges of reverse logistics.
“Bad” Deliveries and Slow Refunds
One reason for greater levels of returned parcels is “bad” deliveries: those that go missing, arrive too late or even arrive damaged. When this happens, it can be difficult to determine whether the retailer, customer, or carrier is at fault. It’s a time-consuming and challenging process, and so retailers will often miss out on reimbursement they are owed. They may also face financial losses by issuing refunds even when not at fault to mitigate a potentially poor customer experience.
Resolving bad deliveries usually entails frustrating, lengthy back-and forth communication cycles and 85% of online shoppers say that a poor delivery experience would prevent them from ordering again.
When expectations of a high level of service are not met, it damages far more than the likelihood of repeat custom. It can also have a negative impact on a brand’s reputation through poor reviews, social media posts and word of mouth.
Similarly, when customers feel they are waiting too long for a refund or replacement after returning an item, it leads to frustration. This can be avoided with a reverse logistics strategy that incorporates the latest third-party-fulfilment technology and a large network of return hubs.
These hubs can be designed to match the retailer’s branding, which helps to build customer recognition and confidence. The 3PL can contact the customer on behalf on the retailer to update them on order dispatches, reducing the likelihood of returns caused by “bad” deliveries.
Just as customers can track and manage orders online, they should be able to log returns too. Forward-thinking retailers are using technology that enables customers to select items from their order and provide information on why they don’t want it. They can also choose their preferred resolution, such as a replacement or refund. This helps to create a seamless, more efficient process, so consumers benefit from a smoother experience and can access their refunds or replacement items faster.
Retailers get the double benefit of improved customer relationships and greater insight into the returns process. For example, they can add custom problems – such as product issues that have been previously reported – to understand why returns are happening and prevent them in future.
This approach can also benefit retailers financially. When returned items are brought into the network more quickly, they can pass quality control and be sent back into stock for re-sale faster.
Environmental Impact
Sustainability is a key consideration in reverse logistics. High volumes of returned parcels have a negative impact on a company’s ESG targets, although this can be mitigated by addressing “bad” deliveries. Consumers are increasingly expecting brands and retailers to improve their carbon footprint.
Another growing trend in retail could provide a solution to the carbon footprint challenges of reverse logistics and create a new revenue stream for retailers: re-commerce. Consumers are increasingly opting to buy or rent used items rather than purchasing brand new. This is especially true of the technology and electrical industry; in the UK, almost two-thirds (64%) of consumers have bought a refurbished or repaired electrical item.
This is a potentially lucrative opportunity for many manufacturers and is hugely beneficial for encouraging a more circular economy. However, it also presents the logistical challenge of meeting growing demand whilst quickly returning, assessing, repairing and reselling an item.
In the existing model, returned tech is sent back to the local fulfilment center responsible for the initial logistics. These products are then transported back to their original manufacturing locations – usually countries thousands of miles away - to diagnose and fix the problem. Once repaired, they are shipped all the way back to the original destination market for resale.
Taking a localized approach can enable products to be fixed and returned to the market as refurbished items more quickly, all without ever leaving the intended destination of sale.
With such approaches, returned items are put through assessment, testing, and refurbishment by locally employed experts using detailed guidelines provided by the manufacturers. This can provide a full end-to-end process: from the logistics of returns to diagnostics and repair, right through to the re-introduction of refurbished items on the market for resale.
Examples of these centers can be seen in the US, UK and EU markets, and forward-thinking technology manufacturers are beginning to integrate circular economy principles into their operations.
This approach resolves another key challenge: maximizing the potential of the refurbished market. A significant proportion of the refurbished goods market, 80% to be exact, is dominated by online sales, predominantly through platforms like eBay. However, many online marketplaces lack the specific features required to adequately list and sell refurbished, repaired or “like-new” consumer electronics.
With dedicated online storefronts for refurbished goods, or integrating a refurbished section within existing ecommerce platforms, retail brands can enhance consumer access to affordable, high-quality products, create new, sustainable revenue streams and promote environmental sustainability.
Mastering reverse logistics is no longer just about returning items. Retailers can turn these critical challenges into opportunities to innovate and in doing so, transform reverse logistics from a potential liability into a powerful tool to drive efficiency, customer experience and sustainability.
