Reverse Logistics: A Missed Opportunity?

While retailers have been grappling with reverse logistics challenges for years, the current global supply chain disruption and ensuing logistics chaos are shining a spotlight on the issue. The pandemic shifted consumer spending away from service-based expenditures (e.g., restaurants, travel) and towards the purchase of goods. As a result, the e-commerce market skyrocketed — and the volume of returns followed suit.

Although Black Friday Cyber Monday (BFCM) sales volumes decreased slightly from 2020 to $19.6 billion in 2021, annual e-commerce sales accounted for a whopping $1.050 trillion of total U.S. retail sales last year. Approximately $218 billion of online purchases, or 20.8 percent of sales, were returned to merchants, according to a survey by the National Retail Federation (NRF) and Appriss Retail.

Furthermore, an increase in fickle purchasing behaviors like bracketing — when a customer buys multiple sizes or colors of a single item, chooses the version they like best, and sends the rest back to the retailer — has exacerbated the challenges to crisis levels.

The Role of Reverse Logistics in Convenience Commerce

Consumers want convenience; they’re seeking an easy shopping journey — from placing their order to returning unwanted items — that saves time and effort. In fact, according to an NRF survey, more than nine in 10 consumers are more likely to choose a brand that ensures a convenient experience — and the returns process is a key element of this convenience equation.

In the face of mounting product returns and rising customer expectations for convenience, e-commerce merchants are reimagining their returns strategy from merely a cost center to an opportunity for customer engagement. As a recent Deloitte article notes, “every product return is a chance to learn more about the customer, drive the next sale, and make it stick.”

As retailers strive to create a frictionless customer journey across the entire fulfillment lifecycle, they should pay attention to these two emerging retail trends:

1. Retailer Returns Portals: Returns portals enable consumers to digitally announce their returned item(s), including the reason for return. Customers can print the return shipping labels via a branded web portal which is accessible from the provider's website. Alternatively, they can present a QR code to print the shipping label at their drop-off point of choice.
2. Enabling Customers to Choose the Carrier: Giving consumers the opportunity to choose a carrier in real time during the checkout process — based on personal convenience (e.g., distance to drop-off points) — demonstrates the commitment to a transparent and convenient customer experience. Selection can be done either via pre-printed return shipping labels (only the selected carrier will charge for the label) or via the retailer's web portal for the printed or QR code option.

Backed by Technology

The pandemic has been a catalyst moment for retailers to evaluate their reverse logistics strategy with a view to building an infrastructure and workflow that not only gives customers a convenient returns experience, but also protects profits. Given that an inefficient returns program can impact profits at the top and bottom line, many major retailers and e-commerce brands are leveraging emerging technology in reverse logistics.

Market leaders are exploring how artificial intelligence (AI) and machine learning (ML) can uncover the hidden costs of returns and optimize the returns process from both an operational and customer experience perspective. With the right solution in place, retailers can reduce the time spent sorting returns, secure lower carrier rates for returns, and get returned inventory back into circulation more rapidly. Indeed, technology that can manage the flow of information and returned goods is essential to creating a convenient, personalized returns experience that exceeds customer expectations — while fostering a competitive edge in peak times and beyond.

Johannes Panzer is the head of industry solutions for e-commerce at Descartes, a logistics technology platform.