Best Practices for Managing Online Returns

The internet has done a lot to level the playing field between buyers and sellers. There’s a new generation of “smart customers” who – with a few clicks – can compare competitive products, their features, prices, availability and delivery options, product reviews, etc.

By 2020, that 100 million consumers will shop virtually which explains why more and more business have transitioned into e-businesses to attract customers, sustain competition and grow. Many traditional business and established brands are moving from conservative shop-centric or geography-focused businesses to a more customer-centric and borderless e-commerce (online) business.

Being omni-channel is everything

Being omni-channel is the latest sales approach that uses multiple sales channels while giving the customer a seamless shopping experience. When different channels get integrated at the back end, a customer can check a company’s website for availability of a selected product using his desktop and later purchase the product with a smartphone, tablet or by visiting the store.

Exceeding customer expectation is the new ‘normal’ in the current day competitive market. And, omni-channel evidences enhanced customer experience.

The e-challenge: managing returns

Although omni-channel has the potential to help businesses exceed customer expectations, there’s a flip side to the story.

Apart from the obvious challenge of adverse financial impact, there are several operational challenges associated with managing returns. Major ones are arranging collection of returned goods, allocation of storage space in warehouses, disposal of the returned item for a refurbishment or ‘as is’ sale (as appropriate). Not to mention the time and manpower associated with such tasks.

One of the biggest challenges of omni-channel is returns management and planning for reverse logistics. According to Invesp inforgraphic on online return rates statistics, at least 30% of all products ordered online are returned. Clearly, businesses need to work around the return challenge in-order to profit.

A survey by Deloitte revealed that while 81% of customers want clear instructions on return policies, only 41% of online retailers met this requirement. Fulfilling this need represents a clear the path to a marketable, competitive advantage for online businesses – but it does come with a price tag.

Optimize returns management

Winning the online market is all about winning trust. A clear and simple return policy certainly helps. Here’s how you can do it:

  • Accessing the financial impact due to returns : Overlooking the returns and reverse logistics cost could be very expensive to a business. Returns involve transportation, handling and warehouse costs. It is a good practice to allow room for ‘returns’ while forecasting costs.
  • Develop operational strategy to manage returns : An effective returns management requires a clear operational strategy. Businesses should develop policies that count in the financial impact associated with returns management. Shipment and return statistics should be tracked and analyzed periodically against industry standards. This helps understands if you are following the best industry practice. It also helps in optimizing financial impact. For example, integrating the delivery and return channels to reduce cost on reverse logistics.
  • Recovering cost : In order to recover return costs some businesses charge a fee for return shipment. A clear return policy could be accompanied with a tiny cost. Example – a return policy charge could be added to the product’s price. This cost helps to recover at least a portion of the losses incurred due to returns.
  • Collect and dispose returns : Businesses need to determine an effective and profitable way to dispose returned goods. They may be sold ‘as is’, refurbished, re-manufactured or in some cases sent directly sent to a clearance reseller. The pros and cons of various practices need to be weighed before choosing the apt solution for re-sale. Some companies do the picking of returned goods by themselves. Others hire a 3rd party logistics partner to do it for them. However, in this case there is no control over the process. It is very important to appoint a reliable 3PL Partner.

With e-commerce giants like Amazon who have set high customer service standards, newer and smaller businesses have an all-the-more acute competition to deal with. Hence, it is vital that businesses plan and manage returns appropriately to sustain and grow.

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