Global ecommerce rose from 15% of all retail sales in 2019 to 19% in 2021, with a full one-third of all products expected to be purchased online by 2026. As this number increases, the amount of returned products is surging as welI. In fact, in 2021 16.6% of all retail sales resulted in product returns, accounting for over $761 billion in returned merchandise, a 6% increase over the previous year.
Retailers are struggling to manage the high volume of returns, in part due to the outdated returns management processes. Consequently, not only are goods taking longer until they’re available for resale, but poor return experiences are also discouraging existing customers from reordering from the same brand.
A more effective returns management process, therefore, can actually help brands by creating competitive differentiation and ensuring repeat customers. In order to achieve this, retailers have to find ways to bring their returns management strategy and processes in line with today’s customer and business expectations.
How We Got Here
Returns management refers to the process of managing returned products. It begins when a customer wishes to return one or more items and ends when a product is put back into stock and is ready for resale.
According to the latest trends, the practice of bracketing – where consumers purposely buy multiple product versions with the intention of returning most of them, is only getting worse. It’s believed to now be considered a legitimate way to shop online.
Bad return policies and experiences reduce customer retention and become a contributing factor to increased cart abandonment rates. Today’s customers have high expectations and will no longer stay loyal to brands after just a couple of bad experiences.
3 Key Elements of Returns Management
In order to understand the challenges retailers face while managing returns, it’s important to look at these three key elements:
- Speed – Retailers need to retrieve returned items and get them back on the shelf as quickly as possible, so they don’t lose out on resale opportunities. Likewise, consumers want to return products and have them replaced in the minimal possible timeframe.
- Visibility – Knowing where returned items are at all times is critical to getting them back to a point of distribution and informing multiple online and offline systems that these products are in stock and can be sold online.
- Control – The process of returned goods is complex, and can involve drivers, warehouses, stores and multiple online systems. Retailers need to have full control over where, when and how they move their goods regardless of whether the product is in transit or in storage.
Bad Returns Management Hurts your Business
Due to high costs, many retailers don’t even bother putting returned products back onto shelves. The cost of the returned product is then taken as a net loss which in the end affects retailers’ overall profit margins.
The logistics of returns management has proven to be a real challenge to the supply chain. A returned product is sent to a sorting center or warehouse, updated in the system, and then shipped to a location for reselling. When retailers have a fragmented supply chain, where systems and people don’t communicate and most processes are still manual, it’s difficult to manage returns at scale.
Although managing returns seems like a hassle, it no longer has to be.
5 Best Practices for Efficient Returns Management
To bring return management under control it’s important to follow these key guidelines
- Digitize and automate returns management
- Unify delivery and fulfillment operations
- Utilize cross-channel returns options
- Partner with other retailers
- Provide customer-centric returns processes
1. Digitize and Automate
Fortunately, leveraging the latest AI and machine learning technologies has resulted in development of cloud based delivery management platforms (DMPs) that makes it easier than ever to manage returns while increasing brand loyalty. By collecting, aggregating and analyzing massive amounts of data, a DMP helps make smart decisions in real time. It can also respond quickly to last minute changes, offering visibility that allows both retailers and customers to track deliveries in real time.
Automation is one of the biggest benefits of using a DMP, as it relies on machine learning with insights and analytics to make smart business decisions in real time. For instance, retailers can give drivers an app that lets them scan returned items with their phone and automatically receive instructions regarding which warehouse is ready to receive delivery.
2. Unify Delivery and Returns
In some cases, retailers can offer a try and return option, where the driver waits for customers to try on a few options and return the ones they don’t want. They can also use gig drivers or carriers to orchestrate returns along the delivery route.
3.Utilize Cross-channel Returns
A DMP enables retailers to offer cross channel returns, giving customers more convenient return options, as well as an omnichannel return experience, where customers can return items through multiple channels such as in store or home pickup –regardless of the channel used for purchasing.
4. Partner with Other Retailers
The more advanced DMPs allow retailers to share resources, leveraging partner delivery drivers to pick up returns on the same route. The same mechanism gives consumers the option of returning items to other retailer’s stores.
5. Customer Centric Returns
End-to-end visibility and real-time tracking and communications has given retailers the opportunity to make returns management more customer centric. Customers can now be kept in the loop regarding every stage of their return, using automated in-app notifications to indicate when the return shipment has reached the warehouse all the way through to when their money is returned. It also facilitates customer feedback by sending an automated request for a Return Experience Rating. This gives both insight into what’s working, and empowers the customer with the feeling they are partners in the return process, thereby strengthening brand loyalty.
Where Do We Go From Here
It’s clearly crucial to make the returns management process more efficient and cost effective in order to remain competitive in today’s ecommerce environment. Online retailers must offer omnichannel fulfillment options, where customers have seamless delivery and return experiences, whether they purchase from a small, medium or large retailer. Deployment of a data driven DMP leveraging the latest AI and machine learning technologies will simultaneously help retailers put returned products back on shelves faster, increasing revenue and keeping customers happy with positive delivery and return experiences.
