Free returns, at what cost?
If you want to win in the e-commerce game, you must run an efficient supply chain that works both ways
The workings of modern e-commerce are nothing short of a miracle. Just a decade or so ago, you had to buy what was on the shelves and in the stockroom of a store - or wait weeks for it to arrive from a faraway factory. Today, not only are delivery times counted in days, but consumers can track the shipping of their product in real time and every step of the way.
This has all been achieved during a period where e-commerce volumes around the world have been soaring. To keep up with the expectations of customers, retailers must be nimble, especially during peak periods. Their order process has to be simple and flexible, and tracking the delivery of products must be provided in real-time. Most importantly, customers now expect that it is both easy and free to return a product - which has resulted in a two-way supply chain that retailers and manufacturers find even more difficult to manage.
Logistics companies, meanwhile, have to do their part to keep this daily e-commerce miracle happening; after all, by 2023 the global e-commerce market is expected to reach a volume of $6 trillion, according to market research firm eMarketer.
'I want it now'
The promise of easy product returns – once simply a nifty advantage over e-commerce rivals – has now conditioned a new generation of high-maintenance online shoppers. They may be fueling online retail but want ever more sophisticated and personalized purchase options that put them in control. According to research by American Express and Biz Rate, nearly 90% of online buyers say that return policies influence their decision to shop with an e-tailer.
The research also suggests that nearly two-thirds of online shoppers expect to have the option to return a product that they have purchased and exchange it for another item, free of charge. For peace of mind, customers also want advanced tracking features, mainly proof that an item has been posted and delivered – and not just during delivery, but also should they want to return the goods.
In other words, online shoppers demand transparency over the entire shopping experience – to the point where it’s barely distinguishable from the convenience of going to a store.
The hidden cost of returns
The miracle of modern logistics may have transformed the shopping habits of large parts of the world, but for some manufacturers and retailers, the task of managing these agile supply chains has turned out to be a costly and labour-intensive endeavour. Their biggest problem, however, is usually the cost and complexity of dealing with returns; keeping up with rapidly changing consumer behaviour is turning into a struggle.
While the vast majority of shoppers rarely search their packaging for the returns form, there is a growing group of habitual returners, and that poses a huge challenge to ecommerce logistics. The returners tend to fall into one of two camps: the first is “The Wardrober”, a person who buys items of clothing to wear once, only to return them. The second is “The Fitting Roomer,” who tends to order several items in different sizes and colours, but plans to keep just one of them, returning all of the others. This can create serious pressures on a company’s logistics set-up, especially during peak periods such as Black Friday, Mother’s Day, Singles Day , Cyber Monday, Christmas etc.
Shipping experts describe the process of returning goods as reverse logistics, and it is fraught with issues. Companies now have to:
- Understand the rationale of returns
- Gain visibility of any potential problems with products that have been returned
- Manage and process the returns themselves, to see whether products are damaged, worn, are fit for resale or have to be recycled or even discarded.
For manufacturers and retailer alike, this presents huge challenges for both their warehouse operations and inventory management; more importantly, if the volume of their returns gets out of control, it can swiftly destroy any profit margin.
That’s why every manufacturer and retailer needs to have a really close and trusting relationship with their logistics partner. If you want to win in the e-commerce game, you must be able to run an agile and efficient supply chain that works in both directions – supplying the customer, and channelling returns back to the point of origin. With the right partnership in place, it can be done – and ensure that customers continue to experience nothing but the miracle of e-commerce logistics.