Industryweek 26985 Online Returns

Many Happy (and Profitable) Returns

Jan. 3, 2018
Reverse logistics can help companies reduce waste while improving profits and customer satisfaction.

Now that the holiday season is over, there is a reverse trend in the supply chain that we are all familiar with—customer returns. Like many, I’ve found this out the hard way when buying holiday gifts for friends and loved ones.

Retailers have always known about this, but with omni-channel marketing and distribution, it has become even more challenging. A recent CNBC report observes that “Americans returned $260 billion in merchandise to retailers last year, or 8% of all purchases, according to the National Retail Federation. That swells to 10% around the holiday season. Because less than half of returned goods are re-sold at full price, retailers may end up forfeiting 10% of their sales at the busiest time of year.”

In fact, according to a recent Wall Street Journal article, “goods purchased online are three times more likely to be returned as goods purchased in a physical store, and as much as $90 billion in holiday merchandise (purchased either in stores or online this season) will be returned over the next few weeks, with more than a third of it coming back before the new year.”

As returns require extra manual work to check for damage and determine disposition, retailers tend to request returns to stores ($3/order to process) instead of distribution centers ($6+/order to return) to get the item back on the shelves quicker, if it can in fact still be sold. Store returns also have the added benefit of customers potentially buying other items right after the return while still in the store.

All retailers, especially online ones, are continuously trying to improve the return process. For instance, Amazon has extended its physical presence for in-person returns to brick-and-mortar locations within Kohl’s Chicago and LA stores and at 400 Whole Foods stores.

Small package carriers are also getting in on the act; FedEx, for one, is partnering with retailers such as Walgreen’s Boots Alliance to open 10,000 locations at their stores to help better enable the returns process.

This backwards process, known as “reverse logistics,” used to be an often-overlooked process. It has now gained increased focus, at least partially due to the rapid increase in e-commerce, with the realization that it can both help companies reduce waste and improve profits and customer satisfaction.

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