Offering a seamless return experience has become the cornerstone of successfully running a retail business. For companies that completely rely on e-commerce and offer free-of-cost returns, managing higher rates alongside controlling customer returns becomes too difficult. As such, handling outbound logistics is already a major challenge, but if one out of every five dispatched products is returned by the customer, it becomes a more costly and complex operational task.
On the other hand, businesses believe that the reverse logistics process shall adversely impact your business which is not at all true. If you manage your returns management process rightly, you can keep its business impact to a minimum. Many companies have managed to generate profitable outcomes even after having an exclusive customer service returns policy.
So, how can you make your customer returns management process more efficient and turn it into an actual profit driver for your business? Let’s find out.
Challenges Faced by Businesses in Managing Customer Returns
Businesses often make this mistake. They focus significantly on the forward logistics and often end up overlooking reverse logistics. The reverse logistics process can be complicated, and if you don’t have the right technology, it can hurt your business in many ways.
Let’s look at some common challenges faced by businesses in managing customer returns and reverse logistics.
When it comes to forward logistics, value tracking is simple. Let’s say a customer has ordered a piece of machinery, so you dispatch a technician to install it. Suppose the machine’s price is $1,000, and you charge an extra $250 for installation. Simple, right?
Now, let’s say the machine you had installed turns out to be defective, and you need to dispatch a technician to replace it. The technician will install a new device and bring the defective one back. This machine isn’t worth $1,000 because it’s faulty. But it isn’t worth $0 either because you can get it up and running after making some repairs. Determining the value of units in reverse logistics can be challenging.
Tracking Routing Status and Warranty
The customer returns management process gets even trickier if the returned product is under warranty or includes a third-party repair by an origin equipment manufacturer (OEM). Sometimes, the warranty you offer may be longer or shorter than what the OEM provides. In such cases, tracking warranty durations and handling the corresponding reimbursements can be challenging.
Working with Contractors and Dealers
You’re likely to face more troubles with reverse logistics if you work with third-party contractors or distributors that extend beyond your own service organization. Distributors usually buy subassemblies and build them into a product of their own. Contrarily, they may sell the subassemblies directly to customers.
Keeping track of how your dealers, contractors, and distributors go about their distribution process is critical to reverse logistics efficiency. Additionally, you also need to track if the defective units were sent back to the dealers after you had advanced the replacement parts to them. Manually monitoring reverse logistics on such a scale is impossible and is often prone to errors.
Poor Customer Experience
The entire point of having a return policy is to provide your customers with a seamless experience. However, an ineffective reverse logistics process can hinder your efforts. All the challenges mentioned above, when combined, result in a not-so-smooth return experience for your customers.
In a business landscape where 92% of customers won’t buy from a company if the return process isn’t hassle-free, an ineffective reverse logistics process can hurt your business in terms of both reputation and revenue.
How Can Technology Optimize the Returns Process?
The cost of return deliveries is $642 billion worldwide and $363 billion in the US alone. While businesses can take several steps to reduce customer returns, there’s no way to avoid them entirely. In fact, 30% of shoppers deliberately buy more items to return them afterward.
However, customer returns optimization doesn’t have to be an obnoxious process. While some challenges may arise, implementing the right technology can help you optimize your returns process.
Let’s look at how technology can help you make your customer returns management process more efficient.
1 Implementing a Clear Returns Policy
Implementing a clear returns policy is essential to improve the reverse logistics process. When customers buy from you, they should know how the returns process works and what to expect.
If you’re an eCommerce business, you already have a website. Make sure you mention the return policy there in detail. Even if you don’t sell online, make sure to have a website for your business. It’ll build your digital presence and will add value to your business in the long run.
2 Knowing Why the Returns Happened
It’s essential to know why customers return products. If a particular product has a high return rate, knowing why customers are returning it can help you fix the problem and reduce return rates. A survey conducted by Chargeback highlights the main reasons why customers return a product. These include:
- Don’t like the product – 25%
- Defective product – 24%
- Don’t need the product – 18%
- Product doesn’t fit – 10%
- Product doesn’t match the description – 9%
- Wrong product – 5%
- Other reasons: 9%
Collecting data – a lot of it – is the key to knowing why returns happened. 44% of companies to date have invested in automatic data capture. Leveraging returns management technology allows you to collect customer data in real-time and identify the reasons behind the returns.
3 Increasing Inventory Management Efficiency
Investing in cutting-edge inventory management technology is the key to optimizing the customer returns management process. Customer returns affect the inventory, and not having an efficient reverse logistics process can cause inventory errors, which in turn can affect your supply chain.
Businesses need to implement handheld scanners and integrate them with reverse logistics management software. Scanning product barcodes reduces the risks of errors. Every scan is recorded in the software, which automatically updates your inventory in real-time. It also allows you to process returns and facilitate refunds quickly.
4 Consolidating Logistics Operations
Redundant logistics operations between reverse and forward logistics can delay the customer returns process. Companies often work with different partners for forward and reverse logistics. Since these partners don’t communicate or collaborate directly, the returns process gets unnecessarily prolonged.
Consolidating reverse and forward logistics operations presents a great opportunity for businesses to reduce returns costs and complexity. With the right warehouse management technology in place, you can centralize your logistics functions and largely enhance the efficiency of your returns. Investing in the cloud-enabled returns management process can allow you to consolidate forward and reverse logistics. That’s why most companies are using cloud-based management applications.
The Future of Customer Returns – What to Expect?
Handling customer returns has always been a challenge for businesses. Furthermore, the rise of serial returners (who over-purchase only to return) has made it vital for companies to optimize their reverse logistics process.
Let’s look at how the future of customer returns might look like.
Evolution of Reverse Logistics to Meet Customer Expectations
Even though many companies are prioritizing reverse logistics, they’re far from meeting customer expectations. Modern-day customers expect fast, hassle-free, and limitless returns. Or let’s put it this way. Customers want to return a product whenever they want and for whichever reason. In the future, companies will try to fulfill these demands while ensuring that they keep their costs in check.
Automation of Reverse Logistics
Automation of reverse logistics processes can improve parcel auditing and reduce costs. In the upcoming years, reverse logistics automation is likely to be one of the major trends, as it can help businesses streamline tasks like routing return requests, labeling materials, and generating packaging. Many companies have already implemented returns management software to automate their reverse logistics operations.
Traceability within Reverse Logistics
Another future possibility to look out for is increased traceability within reverse logistics. Companies worldwide are focusing on enhancing their tracking and tracing capabilities. This has led to the rise of blockchain in the supply chain. Blockchain allows you to achieve more transparency, which reduces the risk of fraud. 14% of companies have already implemented blockchain technology to increase traceability.
Smart Planning to Enhance Sustainability
Another trend that could make its way in reverse logistics is smart planning. Shipping companies and retailers are investing in the Internet of Things (IoT), robotics process automation (RPA), smart analytics, artificial intelligence (AI), and machine learning (ML) to enable better and smarter planning in reverse logistics.
Circular Supply Chains
Circular supply chains is a relatively new concept, but it’s likely to be a big thing in the reverse logistics space in the upcoming years. Since reverse logistics involves the flow of products from customers to shippers and manufacturers, the use of unopened products for fulfilling extra orders can reduce restocking and reshipping costs.
In this retail era, where customer experience is the new marketing, having a seamless return process is crucial. But it doesn’t have to hurt your business. By implementing the right reverse supply chain solutions, you can optimize your reverse logistics and turn customer returns into a profitable business endeavor.
Nitin Lahoti is the Co-Founder and Director at Mobisoft Infotech. He has 15 years of experience in Design, Business Development and Startups. His expertise is in Product Ideation, UX/UI design, Startup consulting and mentoring. He prefers business readings and loves traveling.