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Reverse Logistics: Dealing with Retail Returns

9Mar, 2015
Reverse Logistics: Dealing with Retail Returns

As an online retailer, you know that product fulfilment logistics are critically important. To keep your customers satisfied and coming back for future purchases, you want to ensure that their orders arrive in a timely manner. In today’s fast-paced world, where it feels like everything’s available almost instantly, customers can be impatient with online orders. An unnecessary and unexplained delay in shipment can be a major turnoff, and could cost you that person’s business in the future.

But what about the other side of the product fulfilment equation? By this, I mean “reverse logistics”: dealing with customer returns. In today’s retail environment, returns are an inevitability. Sometimes a consumer returns an item because it’s defective—although in many cases no fault in the product is actually found. However, customers may also return items that they aren’t satisfied with or that didn’t meet their expectations. Maybe they ordered a sweater that turned out to be a size too small, or maybe it was a shade of foundation that didn’t quite match their skin tone the way they thought it would. Reasons for customer returns can vary, but they will always occur, so it helps to be prepared for dealing with reverse logistics. This involves both handling the customer service aspect of returns, and knowing what to do with returned merchandise.

Here are some general issues with reverse logistics that you’ll want to keep in mind…

Have a Convenient Return Policy

A convenient return policy is a plus for many consumers. No one wants to end up with an expensive item that they don’t want, nor do customers like being tied up for hours on the phone with customer service. Your return policy should clearly specify what you will accept, and what you offer in terms of refunds, store credit, or replacement items. It is strongly advisable to keep your return policy as lenient as possible. Although you may take a loss in the short term, numerous studies have indicated that a more lenient return policy is associated with more sales and profits, whereas restrictive return policies can turn customers off and reduce your bottom line. Despite the logistics concerns of handling returned merchandise, a lenient return policy may be in your best interest. Even if you end up with returned items that you can’t just resell at full price, the data indicates that your bottom line will benefit in the long run.

What Should You Do with Returned Merchandise?

One of the issues with reverse logistics is the fact that returned merchandise can physically take up valuable warehouse space. Depending on the conditions of the return— that is, whether the packaging was opened or whether the product was defective— you may not be able to resell it at full price. In terms of logistics, you will need to determine how to best resell or dispose of returned merchandise. In some cases, a returned item that is not defective, and has not been used, could be resold at a clearance price. For example, that wrong-sized sweater that the customer returned could be a clearance item. For other types of products, such as used cosmetics or perishable goods, proper disposal may be your only option. To reduce the logistic costs of dealing with returned merchandise, you may want to consider offering an option such as store credit or a replacement, without requiring that the customer actually return the unwanted item.

Gather Data About The Reasons for Customer Returns

In order to reduce the rate of customer returns, as well as your overall product fulfilment and reverse logistics costs, keep track of why customers return items. If there is a consistent pattern of items being returned due to defects, for example, there might be a problem in manufacturing or distribution that needs to be addressed. Other common reasons for returns may be a matter of marketing, product design, or other aspects of online retail. For example, if there is a consistent pattern of customers returning apparel they ordered online due to sizing issues, it might help to make your sizing chart more prominent and easy to find on the website.

The Final Word on Returns…

Reverse logistics are an inevitable concern in online retail and product fulfilment. Sometimes you might take a short-term loss when an item has to be thrown away rather than resold or liquidated; however, the benefits of a convenient and lenient return policy are worth it in the longer run. Making it easy to return unwanted items, and keeping restrictions on returns at a realistic minimum, can help build customer loyalty and increase customer satisfaction. This will enhance help your brand, build a good reputation, and make customers more likely to buy from you again.

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