The pandemic has not been kind to many things, but to ecommerce, it’s been an unprecedented period of success. Statista research suggests that ecommerce has more than doubled its share of total global retail in the last five years, from 10.4% of global sales in 2017, to 21% in 2022. If you’re not selling online yet, you ought to be.
But with great gains come great returns. In 2021, sorting out product refunds cost retailers an average of over £15,000 a month. Significant revenue gets lost when mass quantities of orders are returned, leaving retailers with a ton of inventory that is then discounted, liquidated, or even thrown out. Bad news for profit and planet.
With production costs climbing and the ever-increasing volume of returns not far behind, optimising your returns process is vital. Here, we outline five fundamental approaches to building an efficient returns strategy to recoup at-risk revenue.
1. Leverage Real-Time Visibility of Your Stock
Retailers should be using an inventory management platform that provides a real-time overview of their stock. Is it in the warehouse? In a store? Returned? Tracking your inventory in one place means you can quickly solve any logistical blockers (such as problems with transit) while being able to shift products between distribution channels.
For example, you could place a returned item that was bought online back in stores where it may be low in stock. This safeguards returned items from the discount/liquidation route, promising a better chance that they can be resold at full price.
2. Optimise Your Returns Validation with Data
Unfortunately, some customers will try to defraud your returns process – and there are more of them than you may think. Hundreds of millions of pounds are forfeited annually by retailers forced to cover the costs of refunding stolen goods or items that do not meet the returns policy.
Customer data is your ally in the fight against fraudulent returns. Implementing a system that connects customer orders to specific transactions, and creating a trackable purchase history, will make it easier to identify individual abusers of your refund process.
A speedy reverse logistics programme where returned items are checked as efficiently as possible will also support the redistribution of items. Retailers facing large volumes of returns can outsource their validation process to a specialist business.
3. Match Returns Channels to Preferred Buying Channels
With so many options available to them, online customers expect a seamless experience across all stages of the shopping process – including returning purchases. According to research in 2021, 84% of shoppers in the UK would not buy again from a retailer if the returns process was unsatisfactory.
Tracking customers’ purchasing preferences through data collection is key to understanding what type of returns policy works for them. While policies will vary across industries and product types (the way you return a dress will be different to returning a case of wine, for example), the common denominator of a successful returns policy will be robust enough to prevent abuse, but flexible enough to make it easy for customers.
4. Place Sustainability at the Heart of Your Returns Process
When sustainability is seen as a business-critical approach to reverse logistics, there are multiple benefits beyond protecting the planet.
Increasingly eco-conscious consumers are demanding that brands are as conscious of climate change as they are. Retailers need to do more than pay lip service to sustainability – and one obvious area to demonstrate it is the returns process.
Reusing and recycling are self-evident ways to mitigate the environmental impact of returned items and look positive from a customer perspective. Other efficiency tweaks to supply chain management can help reduce the carbon footprint of an item, such as directly reshipping an item returned in-store from the store itself, rather than from a warehouse. And you’ll also lower your transportation costs.
5. Use Centralised Cloud-based Software to Manage Data
An inventory management software system that collates all your live inventory and supply chain data will allow you to more quickly return items to inventory to resell, accept returns from diverse channels, handle credits, fulfil exchanges, and establish flexible sets of rules for the returns process.
When platforms are integrated with other financial and logistical areas of the business, you can more easily perform a whole host of highly valuable analyses including forecasting inventory and uncovering patterns to determine the cause of returns. Cloud-based software will also allow access to your data anytime, anywhere – an essential feature for fast-growing organisations.
A one-stop-shop for your inventory management is critical to optimising the sustainability and efficiency of your returns process – minimising waste and maximising profit.
Returns are an unavoidable challenge in the retail industry. With the right strategic approach supported by the right tools, retailers will be in the best position to thrive in the booming e-commerce landscape.
