E-commerce returns have grown into a true challenge in the past five years. While shoppers benefit greatly from a wider selection and variety when purchasing from a retailer’s website, they also lose the ability to try on, feel and see items before purchasing. This has resulted in a higher incidence of returns, leading to a true crisis among DTC retailers.
While returns are a concern across all retail, the cost and impact of returns on DTC stores are much greater. Without a physical store location to handle the processing of returns, retailers must rely on their warehouse or 3PL to manage an influx of returns, including receiving, reviewing, and restocking returned products.
According to Shopify, online e-commerce returns averaged 17.6% in 2023, outpacing regular retail returns, which averaged 14.5%. According to the National Retail Federation (NRF), for every $1 billion in retail sales, retailers will lose $145 million in returns.
These are numbers you can’t ignore and could quickly sink your operations without a firm return policy in place and a 3PL that has a formidable reverse logistics strategy ready to go. Let’s discuss a few steps you can take to avoid becoming a reverse logistics statistic.
If You Can’t Beat Them, Join Them
Chances are, your products will get returned. It's hard to say whether it’ll be for one of the more popular reasons consumers cite, like an item not fitting or not matching the description. But avoiding returns in today’s e-commerce climate isn’t possible. So, what strategies can you employ as a retailer to make the process as cost-effective as possible? Here are some of the most used best practices for reverse logistics success.
Establish a Return Policy
Your return policy should clearly state the following:
● How many days does a consumer have to make or request a return
● What paperwork is needed to verify their return
● What type of refund can they expect, and how soon will they receive it
● Condition the returned items must be in
● Where returns can be made
These parameters should favor your sales cycle and goals. For example, if you sell seasonal items, you might require a 30-day limit on returns so that returned products can still be re-sold at full price. You might also refuse a return on products not in their original packaging or condition. A product that cannot be resold is a total loss to you and your bottom line. You increase your chances of recouping the most from your returned products by clearly spelling out these specifics.
Communicate Your Return Policy
You must let your customers know the return policy, especially if there are different parameters for different types of items. During seasons like Peak, ensure your return policy has a prominent link at the top of your site and across every page. It should also be included in any email receipts or marketing communications.
Enforce Your Return Policy
No matter how strict your return policy is, it’s only as good as the people who enforce it. Before high volume seasons, like Peak, ensure that every team member who may process or touch a return is well-versed in the policy and understands how to address any customer concerns. For the first week or so, ensure your customer service managers review processed returns and flag any that may not have followed the policy. There could be an excellent reason for the deviation, but it’s essential to identify those issues early and adjust as needed.
You can also adjust your return policy on the fly if issues arise that you don’t foresee. Ensure your site includes language stating that this policy is subject to change.
Partner with a 3PL to Handle Reverse Logistics
If you’re working with a 3PL partner, the good news is you don’t have to handle the nitty-gritty of returns processing. Reverse logistics can be complicated, and working with a 3PL allows your team to focus on customer support and leave the hassle of returns to them.
Let’s discuss a bit more how a 3PL can truly help you transform your business through reverse logistics and beyond.
Using a 3PL to Manage Your Returns
Your Third-Party Logistics (3PL) Provider is best positioned to help manage your returns. The team is already well-versed in your products and policies and works to create the most streamlined processes to reduce redundancies and run the most efficient operation. This type of efficiency is key when dealing with reverse logistics.
Working with a 3PL Partner
Your 3PL will work with you to simplify your reverse logistics as much as possible. They are the experts and, therefore, have the most insight into how to make your returns process easy. However, not all returns result from dissatisfaction; sometimes, they are built into your product's lifecycle.
For example, many medical appliance and medical testing companies leverage a type of “returns” process. An example is a company related to teeth straightening; customers must first receive a mold kit, make a mold of their mouth, and then mail their personalized mold to a separate lightweight manufacturing facility to create the end product. You don’t want to make it a hassle for them to return the product; you want to make it simple, which will result in a higher rate of return, which equals more long-term customers.
In the case above, the 3PL generated a return label to accompany the initial shipment, making it simple for the customer to complete the kit, rebox the mold and send it back to the facility indicated on the label. In many cases, this return label can be sent to a different third-party warehouse—most likely a processing warehouse.
While this may seem easy, it is only automatic for some WMS. Make sure you're working with a 3PL that values technology and uses the latest software.
Avoiding Common Return Reasons
Twenty percent of returns are due to damaged or defective items. Working with a 3PL helps to avoid this common pitfall. Your 3PL will care for and pack your items to ensure they arrive at their destination in one piece. Additionally, many 3PLs offer product inspection services for incoming shipments to weed out defective items before they are pickable.
Getting the Basics Right
Items are also returned due to mispicks and misships. Working with a 3PL, these issues should be resolved overnight. You want to be sure you’re getting the basics right to keep your customer service levels high.
Make Reverse Logistics a Priority
As we head into another Peak season, it’s time to up your reverse logistics game. Establish a solid and enforceable return policy and partner with a trusted 3PL.
By prioritizing reverse logistics, you will increase customer satisfaction, decrease the number of tickets for your support team, and hopefully recoup more revenue from returned products. Some things are inevitable, like death, taxes and e-commerce returns, but a poor reverse logistics process doesn’t have to be.
