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7 Strategies to Reduce the Cost of Return Shipping

Peak shipping season will be here before we know it.  (Although there’s an argument to be made the current pandemic IS peak shipping season…) And as retailers move towards the end of 2020, returns will predictably increase.  But just because retailers can predict this surge doesn’t mean managing it is easy. Returns management, when left without a strategy, can negatively impact profits.  Consider, shoppers return 15 to 40% of what they buy online, whereas only five to 10% of in-store purchases come back. To further put those statistics in context: in the U.S., Statista reports the cost of returns has increased by approximately 75% in the last four years, and this number doesn’t account for restocking expenses and inventory losses.

Here are seven strategies to simplify returns and control costs:

1. Encourage In-Store Returns and Drop-Offs

If you are an omnichannel retailer and your store has re-opened, you can encourage shoppers to drop returns back to your store. By using existing infrastructure as fulfillment and returns centers for online consumers, retailers can reduce shipping costs and increase customer footfall. Buy Online Return In Store (BORIS) not only costs less for retailers, but pre-pandemic, many customers preferred it. Case in point: a 2018 UPS study reported 58% of shoppers in the US prefer returning an item to a store. The same is true for 45% of Europeans and 64% of Canadians.

2. Plan Ahead with Return Labels

Consumers want convenience when it comes to returns, and multi-carrier shipping software enables retailers to meet this need. Multi-carrier shipping software will automatically print the appropriate return shipping labels when the order is fulfilled.  Retailers then place those return labels into the cartons, enabling a simple, fast, and seamless return process regardless of whether the consumer returns the product to the store or ships the product back to the retailer. And while convenient for the consumer, equally beneficial is the retailer’s ability to pre-select the carrier service that makes the most financial sense for return shipping, thereby controlling transportation costs and minimizing return shipping errors.

3. Deliver Parcels On-Time

ebook logistyx quadrant Choosing a TMS for Parcel ShippingThirty-eight percent of seasonal and holiday purchases are returned, and one factor contributing to this statistic is late delivery. Who needs holiday presents after the holiday? Multi-carrier shipping software with a Control Tower helps retailers ensure goods reach customers as promised, even during peak season.  The Control Tower will send early warning signs when there are parcel delivery issues or “exception events,” empowering customer service teams to proactively trouble-shoot the exception event and communicate delivery updates to the customer in real time. For example, perhaps the product can be sent from a different distribution center to arrive on time. Or perhaps the customer is willing to retrieve the product from a nearby store or locker. Customers can even track and trace shipments on company websites without the need to visit carrier sites, reducing inbound calls about shipment status to customer service and increasing the customers’ browsing behavior on the retailer’s website – which (fingers crossed!) could lead to additional purchases. Consider too that tracking delivery exception events enables retailers to capture accurate carrier performance data – improving carrier service measurement and better informing carrier contract negotiations.

4. Track Returns

Returns present retailers with an inventory problem, because any products that are in the hands of the consumer, pending return, or in the process of being returned, is inventory that is unavailable to refurbish or redistribute.   However, as long as retailers are tracking parcels on the outbound shipping leg, they can use the same system to give them visibility over return shipments – and available inventory for resale – from the moment they are collected until the moment they arrive back at the warehouse.

With an accurate picture of expected return volumes, retailers can assign an appropriate level of workers and resources to manage the returns and ensure the goods can be swiftly put back in stores or warehouses for resale.

Moreover, tracking returns protects both the customer and the retailer. For example, some retailers now provide a refund to the customer as soon as the carrier scans the return parcel.  While there is a level of risk to the retailer because the product might not be in good enough condition to put back into stock, customers are more likely to be loyal if they know they will be refunded quickly.  In the UK, for example, an increasing number of retailers are starting to accept Klarna, a service that makes it possible for consumers to avoid paying a retailer altogether for a purchase they subsequently return.

5. Don’t Overlook International Customers

Cross-border retail is becoming the norm. E-commerce platform Shopify reported 57% of shoppers worldwide make international purchases.  While good for revenue, this complicates returns.  Some carrier networks manage returns better than others, and therefore return shipping processes aren’t standardized across the world.

Therefore, it’s important to build a returns process that accounts for cross-border commerce, and multi-carrier shipping software can help.  For example, retailers using a single carrier for outbound shipments may need to consider alternate carrier networks for returns. With multi-carrier shipping software, retailers can rate shop the return delivery options of global carriers in their transportation network and select the services that will satisfy customers at the lowest cost.

6. Take Care of the Environment

Most retailers want to re-sell returned items when they come back in good condition. In some cases, however, warehouse managers lack concrete guidelines for determining when a return can be re-stocked and when it can be destroyed.  Unfortunately, approximately 30% of returns end up in a landfill. Scrapping items that could be re-sold, even in a secondary market, impacts profits and takes a toll on the environment.

7. Avoid the Returns Process Altogether

Some companies are trying to avoid returns altogether, with wrong or lost orders replaced at no cost to the consumer.  For example, in the United States, pet supplier chewy.com asks customers to donate any incorrect orders to a local animal shelter.  Why would they do this?  They avoid the cost of dealing with the return, which may be higher than the cost of the new delivery. And in the case of prescription medications, seasonal products, or those with a short expiration date, the retailer may be unable to process and resell the products within a suitable timeframe.

Find the Right Technology Partner to Optimize Returns

In times like these, retailers need a partner in the logistics space on whom they can count – one who can help streamline the returns process and reduce transportation and operational costs.  Ready to find that partner? Talk to a Logistyx expert today.