Key Points:
- Reverse logistics is the process of moving products from the customer to their original point of fulfillment, either for disposal or restocking and resale
- Return rates have reached an industry average of 25%, up to 40% in the apparel niche
- According to McKinsey, 83% of businesses say that returns pose a threat to their profitability
Increasingly, eCommerce shipments are behaving like boomerangs. Return rates have reached an industry average of 25%, up to 40% in the apparel niche. With so many packages going out only to come right back, now’s a good time to dial in your reverse logistics.
What is reverse logistics? Just a fancy term for your returns process. The returns process is a pillar of your fulfillment operations that also impacts your customers and your bottom line. After all, return labels cost money, and online shoppers expect convenience at every stage of the customer journey.
Orchestrating returns can be difficult as a result. This blog lays how to coordinate returns effectively, including:
- The 5 steps of reverse logistics
- How to create a returns policy
- How to optimize returns for profits
- Best practices for returns processing
Easyship helps you simplify the returns process with two automated features. First, our automated label generation creates all shipping and return labels on your behalf for faster fulfillment. Plus, our USPS returns pay on scan lets you include a returns label for USPS shipments for free, and only pay for the label if it's used.
Ok, let’s talk reverse logistics.
Table of Contents
Reverse Logistics is a Pillar of Returns Management
Reverse logistics is the process of moving products from the customer to their original point of fulfillment, either for disposal or restocking and resale. It’s a set of operational and customer-facing protocols that work together to enable an effective return. In other words, reverse logistics is everything that enables you to reclaim a physical item, but it’s also the service you provide returnees.
Consider what happens when you return a pair of shoes to Zappos. You know the company offers free returns because the returns policy is stated on the website, product page, and post-purchase delivery email. These resources then direct you to print the prepaid shipping label in your account. All that’s left is to drop the return package at your nearest UPS Store location.
This simple sequence isn’t the result of chance but of a well-crafted process of reverse logistics that satisfies both your business and your customers.
Everything in eCommerce comes down to customer experience, and returns are no exception. A full 33% of online shoppers say they’ll abandon a brand that has a difficult returns process. To be safe, assume your customers expect the returns experience to be as seamless as the shopping experience. Fortunately, you can engineer an effective returns process for customer satisfaction with just a few steps:
5 Steps to Ace Your Reverse Logistics
Here are five steps to ace your reverse logistics.
1. Craft a Transparent Returns Policy
Make sure to communicate your returns policy at key points along the customer journey. This way, shoppers get ample opportunities to review your return policy. Like the UK apparel retailer ASOS, be sure to feature your returns policy on your:
- Home page
- Product page
- Cart page
- Post-purchase emails
Making your policy obvious helps to reduce customer frustrations, which streamlines operations for everyone. Clearly state the steps in the returns flow, and be as simplistic as possible. Policy visibility and retention are what pave the way to a frictionless return sequence. For best results, try our free return policy generator.
2. Consider Your Bottom Line
An ideal returns policy encourages customers to buy but also mitigates the economic impact of returns on your bottom line. According to McKinsey, 83% of businesses say that returns pose a threat to their profitability. Easyship’s data confirms this, showing that profit margins on returns hover around 1% on average. Not only are you paying for a return label, but also the labor associated with restocking, plus any lost item value.
Lenient return policies are popular with shoppers, which makes them good for conversions. But what’s good for revenue can lead to abuse from free-shipping fixated buyers. Especially if free returns are on the table, reverse logistics can quickly become unsustainable.
Aim to strike a balance where returns are seamless for genuine shoppers, but not so easy as to invite abuse. You can experiment with policy specifics to suit customers and growth goals at once. In the last section, we’ll discuss how to use your analytics to set a cost-effective yet customer-friendly returns policy.
Related blog: The Secret Keys to eCommerce Returns
3. Prepare for Returns
As a merchant, you’ve little control over the timing or frequency of returns. This can cause delays, stocking issues, and frustration. It’s important to create a solid foundation for your reverse logistics, and this begins with prepping for returns in advance.
Here are a few ways you can prepare for incoming returns:
- Forms: Gather details from shoppers to learn why the item’s being returned, and how to efficiently process it back into inventory.
- Custom labeling: You can customize your return shipping labels to arrive at the best location for efficient sorting, separation, and processing. This becomes more important if you have a high volume of returns, have the location of a dedicated return, or work with a fulfillment partner.
- Returns tracking: You have up-to-the-minute visibility of all returns in your Easyship dashboard, thanks to real-time courier data updates. This is also true for items returned to a fulfillment partner. And when returns get restocked, your inventory updates automatically.
4. Provide a Seamless Returns Experience
These days, the return experience is a form of customer service. This is because an easy returns process is vital to retaining customers. To ease returns by mail for customers, try the following tactics for your reverse logistics:
- Communicate your returns protocol: Make it easy for customers to get their shipping label and return the item.
- Promote third-party drop-off locations: Drop-off points are often closer than a local post office, so highlight convenient spots like a USP Store, Amazon Locker in Whole Foods, USPS blue boxes, etc.
- Include a return shipping label: Adding a return label to your shipments eliminates a few tedious steps in the returns process. Paying twice for labels can add up, though. With Easyship’s Pay on Scan feature, you can add labels to USPS shipments for free, and only pay for the label if it’s used.
5. Develop a Returns Receiving Process
It’s important to create an efficient protocol for handling returns as they arrive. This will require you to set aside an area for processing returns, and assign labor hours (yourself included, perhaps) to getting incoming items back into inventory or logged as a loss. You’ll want to create steps for the following reverse logistics processes:
- Identifying items
- Sorting
- Repackaging and refurbishing
- Restocking
- Disposal, if necessary
Easyship is part shipping platform, part inventory management system. This means that all returned products are automatically re-updated in your inventory as in stock. This saves you precious time that would be otherwise spent on manually entering returned goods back into your eCommerce inventory.
Easyship also enables returns optimization with robust shipping analytics. Refer to your shipping dashboard to track your financial key performance indicators (KPIs) for returns, then look for ways to improve fulfillment rates, reduce returns, and reduce the cost of reverse logistics.
“The right analytical approach to returns from the outset helps to fend off depreciation, reduces the number of items that end up in landfills, and even boosts revenue by driving repurchases of goods.” – Tobin Moore, CEO of Optoro
As you look at your returns data, consider:
- The unit economics of returns: What is the true cost of a return? What is the cost in each item category? Your most-returned items? By channel? Analyzing granular cost data in your analytics will point to where the greatest cost savings can be found.
- The cause of returns: Look at data for returns by channel and reasons given for returns with an eye for patterns. Trends can highlight the need for adjustments to specific products, your return policy, or the in-store shopping experience to stop returns before they start.
Reverse Logistics: Your Returns Process
Returns in eCommerce pose a challenge in terms of both cost and customer experience. For best results, develop a customer-friendly returns flow that’s easy for shoppers to understand and execute and allows for efficient reverse logistics. Our shipping policy generator can help. Look to your shipping analytics to identify areas to reduce fulfillment costs and reduce return rates.
With Easyship, your return labels are automatically generated for all your shipments. Plus, our new USPS Returns Pay on Scan feature lets you add return labels to your shipments without any financial risk.
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