In business, as in life, problems are often opportunities in disguise. For retailers, increasing return rates due to increased online sales offers both a challenge and a chance to reinvent the role of returns in the goods economy. On the consumer side, the post-purchase experience, especially returns, can be intimidating. Often times, contacting customer service to return an unwanted or defective item and get a quick refund can seem more complicated than it’s worth. But challenges also mount for retailers, distributors and others who strive to give consumers what they want while keeping costs under control. It’s time to start turning the post-purchase experience from a cost needed to do business into a competitive advantage.
The effects of the pandemic on consumption habits are expected to continue, leading to a permanent increase in online sales. E-commerce has traditionally generated a return rate of 39%, according to the latest industry figures. As this trend continues, reverse logistics becomes increasingly complex. A recent quarterly letter to suppliers in Saks Fifth Avenue’s e-commerce division confirmed this, citing that nearly 50% of e-commerce returns are made in physical stores and about 30% of online orders are fulfilled. at the store. Gone are the days when store-bought items were sent back to the same store and online orders returned to a separate e-commerce system.
Adopt the new standard
âConsumer buying habits will never go back to where they were before COVID-19,â says Ann-Marie Daugherty, Managing Director and Senior Vice President of Supply Chain at Intelligence Inmar, a data platform company focused on the post-purchase ecosystem. âLook at the convenience that customers now experience having items delivered to their doorstep. Longer term, we’ll probably land somewhere that’s not as extreme as where we are today; However, we need to simplify the process for customers and retailers to keep prices low and retailers profitable.
The challenge is that the complexity increases as the business grows. Most retailers are struggling to meet new demands with legacy processes and technologies that just can’t keep up. What they need are systems and software that allow them to understand and manage the customer experience with real-time analytics and insights, as well as a smart control tower that keeps customer satisfaction high throughout. maximizing value recovery.
Retailers are offering more to consumers than ever before, including fast and free shipping, according to Daugherty, while prices remain the same. Add in the costs of implementing and maintaining the technology that makes shopping online as easy as it is, and margins drop quickly. Retailers are forced to look elsewhere to cut costs. The product journey after purchase should be a central point for online retailers who need to deliver a seamless, end-to-end return experience to their customers while reducing costs. These efforts will result in loyal and satisfied customers who will buy again and again.
The secondary market, then and now
According to Curtis Greve, vice president of remarketing at Inmar Intelligence, reverse supply chains experienced similar challenges over a decade ago. âIn the 90s, there were two big engines: about 25% of the product that came back was liquidated and the rest went back to the manufacturer,â he says. âBut when the manufacturers moved overseas, there was no place to return the product. We went through a period of 10 to 15 years where they said, We can’t stand it; just throw it away. Then the regulators came in and said, You can’t throw it all away. You need to take alternative action.
As usual, necessity was the mother of invention. As a result of the new regulations, the secondary market – discount stores, outlets, etc. – flourished. Since 2005, the secondary market has experienced steady growth of 10% per year. âIt continues to grow,â says Greve. âIt’s recession proof. In the middle of last year, our liquidation business exploded because everyone wanted more for their dollar. People who shopped at Macy’s shopped at places like Walmart. Nordstrom’s biggest area of ââgrowth was Nordstrom Rack, even before the pandemic. “
Despite the current increase in online sales and return rates, there remains a tendency to liquidate inventory rather than figuring out how to get it back into regular sales channels. Retailers continue to learn from trailblazers like LLBean, who have learned that all is well with the majority of returned merchandise. Most often, product returns are related to size and / or fit; therefore, these products can be put back into stock with minor intervention. Most consumers who return online purchase multiple sizes of clothes or shoes to try on at home, then return the ones that don’t. Liquidation, in this case, unnecessarily prevents the recovery of profits. âSome businesses are improving, but omnichannel retailers in particular are really struggling, especially those born into the brick and mortar world,â said Greve. “They can’t put the item back on the shelf because they don’t have the SKU in their in-store assortment, or they don’t have the ability to centrally process it and put it back in stock to fill future orders.” in line. Therefore, it is liquidated.
Reduce costs with efficient returns
Retailers need to change the way they think. âThe returns were an afterthought. They were placed on racks on the back wall and warehouse staff handled them when they could reach them, âsaid Jeff Battaglia, vice president of customer development at Inmar. âNow retailers understand the need to get returned merchandise back to stock in a week or less. “
Battaglia cites three main challenges to implement a better returns process. First, the cost of transporting returned goods to a place where they can be processed remains high. Second, once it arrives for processing, quality control inspections – deciding whether an item can be put back on the shelf or should go to another channel – present their own complications. Third, getting returns back into the inventory flow is also costly. Unless these costs can be reduced low enough to make economic sense, returns remain a drain on the bottom line.
To solve these problems, retailers should turn to smart technology. By using a single digital data platform, businesses can eliminate the more expensive touchpoints associated with processing a return. The item can be tracked using a scannable barcode assigned at the start of the returns process, allowing the retailer to implement transportation and handling efficiency smarter. The more efficient the returns process, the less it costs the retailer and the faster the refund for the consumer.
âThe customer no longer waits up to six days for their returns to be shipped across the country and then another three to five days to process and inspect the return before the consumer receives a refund,â Battaglia says. Faster returns and refunds improve the likelihood of repeat purchases and long-term buyer loyalty. A more efficient process also reduces the expense and hassle of dealing with consumer complaints. “Without it, most return policies will not meet consumers’ expectations.”
It’s all in the data
Data is equally important to the returns process. When a retailer can analyze returns by geography, origin, SKU, product line, or any number of related attributes, they can identify trends and unlock solutions. âWe can show our customers where they are having problems,â Battaglia says. âMost retailers don’t even have this data before contacting us. Or if they have it, they don’t do much with it. Having specific feedback information is important because different divisions within companies often have misaligned priorities. âSales, warehousing and merchandising managers have different interests,â he says. âWe often find that the warehouse doesn’t handle returns well quickly or that sales don’t care about preventing returns; they just want to maximize sales.
Better and more recent data can also identify underlying issues with the quality control of goods. For example, in the case of a shoe retailer, Inmar found that one SKU was returned at a higher rate than others. Upon investigation, it turned out that there was a flaw in the way this particular shoe was laced, causing it to tear. âA change in the manufacturing of this benchmark has resulted in significant savings and happier customers,â says Daugherty. Previously, such issues would get lost in the mix or were discovered too late to make a real difference.
Managers and executives across the organization need to start harnessing the power of data to manage post-purchase functions smarter. âOne of the things that is changing in the return space is the capacity for digital transformation,â says Daugherty. âPreviously, it was common for retailers to just have someone to process returns for them and think about it a bit more. But the value is really in the data. If you can capture returns data and combine it with customer order data, there’s an incredible story to tell, right down to individual customers.
As reverse logistics becomes a more central component of digital commerce and retailers learn to meet the challenges of this environment, what was once a costly problem can become a source of unexpected opportunities.