Reverse logistics – how returns management could be key to increasing your profitability

Reverse logistics will be on the agenda of many businesses in the coming months. Online sales are booming, as is omnichannel and connected commerce, so naturally, there is a lot of attention on the returns management processes. Retailers are focused on the most cost-effective and logistically efficient way of dealing with them. Estimates vary, but somewhere in the region of 20% of online orders are returned, and according to online payment company Openpay UK shoppers return £5.2 billion in goods every year. With the increase in sales caused by the pandemic and the general trend toward delivery based purchasing, that startling cost will only increase. It’s no wonder then that reverse logistics is under the microscope.

Reverse logistics is the general term for the way these returned are processed. It is quite literally a reverse of the initial shipping process in that the goods are shipped back by the customer, treated as incoming merchandise, processed as stock and ultimately re-distributed. Of course, all this processing has a cost, not just the obvious administrative one.

Returns are an unavoidable part of retail in bricks and mortar, but more specifically for online sales. To give them a rather general term, many returned goods are ‘not suitable’ returns. They are items that are still in working order and in a saleable condition, but the customer has either chosen the wrong size or changed their mind after receiving the delivery. 

Returns impact sales, and sales rely on returns 

There is a chicken and egg problem with returns. Without a policy that favours the buyer by offering an easy and usually free returns process, the retailer risks dissuading the consumer at the point of purchase. The result of this is that consumers are more inclined to purchase with a return in mind. As one shopper told the BBC about returning items, “… If I’m not paying for postage, I might as well.” This leaves the retailer between the rock of needing to meet customer expectations and the hard place of bearing the burden of those returns.

The solution can not reduce consumer confidence by making returns more difficult because the more straightforward the return, the more that brand confidence grows. 

It’s more than consumers who increase returns 

While customers changing their minds is a driver for returns, your manufacturing, marketing and supply chain can also be a factor. 

Your marketing is key to your sales, but you will damage your brand and directly impact your returns if your marketing overpromises and underdelivers. Minor errors such as not-true-to-life imagery or inaccurate or lack of descriptions are common causes of marketing-led returns. 

Secondly, you will likely see an influx in returns if you experience a manufacturing issue, such as a slightly smaller product than expected or a quality fault. Unfortunately, these issues happen; however, working with the right 3PL partner to manage your reverse logistics could help you overcome this.

We also need to remember that slow and inefficient delivery significantly impacts returns. 40% of consumers expect free deliveries within 1-3 days, while 45% expect paid deliveries to arrive the next day. So when deliveries are delayed, customers are more likely to be dissatisfied with their item, and you risk losing them to a competitor who can deliver quicker, knowing that they can return your product. While many brands knee-jerk reaction here is to stop offering free returns, this is simply a diversion from addressing the real issue – slow deliveries.

Customer Returns Image
3PL Rerverse Logistics Operations Image

How the right 3PL partner can improve your returns management 

The efficiency of the reverse logistics processes clearly takes on a new importance here, and it affects the ongoing sales for a retailer and the bottom line profit. No wonder retailers of all sizes are looking to 3PL businesses to help them rationalise their returns and reduce the delay between return and stock being back on the shelf.

The ideal scenario then is that when a customer returns goods via your chosen method, your 3PL partner not only responds but does so in the right way. On arrival, all returns should be examined, and the return reason reported before being returned instantly visible in your stock-control platform in real-time. 

The key to this is real-time reporting on return reasons and alerting of trends out of the ordinary. For example, if you suddenly receive an influx of returns for “item too small” and you can identify it as an individual SKU, you are better positioned to address this with your manufacturer and prevent this from happening moving forward. Similarly, if a particular SKU has high returns for “not as expected”, you may choose to review the marketing materials. 

Improving your operations by going the extra mile 

When you’re looking for a new returns management partner, it’s not just a case of will they dispatch your orders fast and handle your returns. To optimise your returns management process, you need the right partner. 

Here at Synergy Retail Support, we also go the extra mile to have all items thoroughly checked by our specially trained Quality Control Teams. This allows for remedial action and saleable products to be repackaged and returned to stock. As soon as they are available, the item becomes visible in real-time as saleable stock assets and can be turned around as a new sale in the fastest possible time. For items that require remedial attention, our on-site experts are ready to help, saving you the cost of destroying items or shipping them to another location for repair.  

Additionally, we can monitor the returns by batch and by SKU from the point of scanning them back into the system. This alerts us to report potential batch fault issues and return trends that may result in a reduction of quality for your customers, allowing your designated account manager to notify you proactively. The result of all this is a more efficient returns process, confidence in the quality assurance being applied and a faster turnaround between return and stock becoming available for sale.

3PL Rerverse Logistics Operations Image

In a competitive market, you must have confidence in your reverse logistics process because, without it, your costs rise, and your consumer confidence dips. At the end of the day, swift, accurate, and fully integrated reverse logistics could well be the edge that gives an eCommerce brand the advantage in the battle for consumer confidence.

If you’d like to discuss how we could help you improve your operations with our reverse logistics service, contact us today. 

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Gary Rees

Gary Rees

Gary Rees is the owner of Synergy Retail Support, one of the leading SME fulfilment centres in the UK. Having successfully grown the business for over 30 years and with relationships with most household brands, he now looks to partner with customers rather than just act as a supplier so that both parties can grow together. Gary has extensive knowledge in retail compliance, production technologies, shipping details and customer service.

Feel free to contact me personally if you’d like to discuss your business.

01604 412 290