Online shops can’t ignore reverse logistics anymore
In line with the increasing number of returns, tapping into an efficient reverse logistics strategy is crucial to retailers and can help reduce waste, improve profits and customer loyalty.
Along with the globally increasing e-commerce market, the number of returns are likewise increasing each year. This puts pressure on retailers’ returns policies and
procedures. According to UPS, 67% of online shoppers check out an online shop’s return policy before making their purchase. An attractive and customer friendly return policy is crucial to sales and customer loyalty.
“Reverse logistics is an important factor to consider, if a company wants to succeed. Returns were earlier considered as an additional expense for a company. But we try to help companies understand that returns has become an income opportunity. A good returns policy helps to keep customers loyal. If you don’t meet customers’ needs for a return policy, your online shop is seen as not reliable and transparent and as a result, you might end up losing many potential customers,” says Chema Odriozola, Nordic Director at UPS.
According to UPS reverse logistics include: return policy administration, product recall protocols, repairs processing, product repackaging, parts management, recycling, product disposition management, maximizing liquidation values and much more. Although reverse logistics is a huge area, it rarely receives much attention. But what many companies fail to realize is that effectively managed reverse logistics can help to reduce waste, find hidden profits and improve customer loyalty.
Having a well-shaped return policy does not necessarily generate more returns, instead it generates more sales due to making the purchase decision a lot easier for the consumer. In UPS’s report Recovering Lost Profits by Improving Reverse Logistics they identify five key recommendations for reverse logistics.
Five key recommendations for reverse logistics
Here are UPS’ five key recommendations if you want to improve reverse logistics in your company:
- Know your returns:
Find out what kind of returns your company most often receives and what happens to the returned item in the returns process.
- Place a value on returns:
Discuss how the returned product can be resold in secondary channels, and also how an improved logistics process for repairs can boost your customer satisfaction levels. Calculate how much one loyal customer is worth to your business? And also, consider recycling and final disposition issues.
- Assess your infrastructure:
Consider what strengths and weaknesses might exist in your returns process from incoming returns to updating the warehouse, reshipping and required staff for handling returns. Focus on taking advantage of every opportunity to get more revenue from all returned products.
- Identify success:
Depending on which value you can attribute your returns, set a goal that helps you recognize success. This may lead to increased revenue that you can measure, or a success criteria may be protecting revenue from potential risks.
- Commit to success:
Whether you have in- or outsourced your returns management, reverse logistics is an ongoing process that requires attention. Reverse logistics may seem costly at first, however the long-term financial benefits that can result from a comprehensive reverse logistics plan cannot be overlooked.
If companies fail to consider and improve reverse logistics, they’ll end up losing customers to competitors and potentially let returns take up a much larger share of warehousing and shipping costs, than they should.
Read more: How this Norwegian online shop turned reverse logistics into their competitive advantage.
- The product with the highest return rate is clothes.
- In the first half of 2016 Norway has had return rates of 7%, Denmark of 9%, Sweden of 12% and Finland of 18%.
- Clear Returns estimates that returns cost UK retailers £60bn a year, £20bn of which is generated by items bought over the internet.
- More and more companies such as ReBOUND Returns who exclusively specializes in reverse logistics start to occur.
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