Dealing with customer returns an increasingly costly process for companies

Consumers prefer in-store returns no matter where the purchase was made. This creates a heavy burden on stores as many receive back items that were purchased on line in addition to those purchased in the store.

Reverse logistics

Wikipedia describes reverse logistics as follows: "Reverse logistics is for all operations related to the reuse of products and materials. It is "the process of moving goods from their typical final destination for the purpose of capturing value, or proper disposal. Re-manufacturing and refurbishing activities also may be included in the definition of reverse logistics..Any process or management after the delivery of the product involves reverse logistics. If the product is defective, the customer would return the product. The manufacturing firm would then have to organise shipping of the defective product, testing the product, dismantling, repairing, recycling or disposing the product. The product would travel in reverse through the supply chain network in order to retain any use from the defective product. The logistics for such matters is reverse logistics."

A retailer faced with many returned goods is faced with the cost of sending the goods back to the manufacturers or distributors at some cost. It requires quite a bit of store labor to do this. As a result some retailers hire what are called 3Pls who are in turn expensive to hire.

What are 3PLs?

Wikipedia describes third-party-logistics (3PL) as follows: "Third-party logistics (abbreviated 3PL, or sometimes TPL) in logistics and supply chain management is a company's use of third-party businesses to outsource elements of the company's distribution and fulfillment services."

Either reverse logistic method is costly to the retailer and could impact profits.

Experts make suggestions

Carly Llewellyn, Senior Director of Marketing and Communications at Optoro warns that retailer should carefully consider their methods in dealing with returns: "The biggest factor is strategic. What’s the role of your store? Is it a showroom, a traditional brick-and-mortar outlet or an omnichannel hub? Retailers that operate their stores as showrooms or more traditional brick-and-mortar outlets need to have DCs play a larger role."

"DC" stands for distribution center described as follows: "A distribution center for a set of products is a warehouse or other specialized building, often with refrigeration or air conditioning, which is stocked with products (goods) to be redistributed to retailers, to wholesalers, or directly to consumers...A typical retail distribution network operates with centers set up throughout a commercial market, with each center serving a number of stores. Large distribution centers for companies such as Wal-Mart serve 50–125 stores. Suppliers ship truckloads of products to the distribution center, which stores the product until needed by the retail location and ships the proper quantity."

Pete Madden, director of Alix Partners said that stores that sell to walk-in customers as well as offering buy-on-line services, pick up in store or ship from store options have more factors to consider when it comes to returns.

Llewllyn notes: "We have seen retailers focus on improving their returns process as part of a broader effort to create better experiences across the entire customer journey, Some retailers report as much as 90% of online returns happening in stores instead of through the mail, so the store obviously plays a critical role in returns management. There is no silver bullet. What we have seen is that retailers are investing in technology solutions that can support both in store and DC returns management. Everyone is looking to improve returns management in all locations. Forward-thinking retailers have identified the stores as a priority for improvement, because there is a huge opportunity to minimize costs across the network and get to the optimal disposition the fastest."

Retailers no doubt could make it more difficult to return purchases but such a tactic might save money on the returns end of the business but lose disgruntled customers. Such a tactic might also help competitors with more liberal returns policies to gain some of their customers.

Shopping on line

About one third of shoppers claimed they shopped less online if returns were likely to be a hassle. A recent survey also showed that shoppers under 30 preferred to return items to a brick-and-mortar store. The study also showed that 56 percent of shoppers were more likely to shop with a retailer on -line if the retailer allowed free returns and didn't require a return label to be printed. The cost to the consumer in time and or money to return items shows that reverse logistics is important for on-line retailers.They will need to weigh the costs of a liberal return policy against the benefits in keeping and attracting customers.

Previously published in Digital Journal