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Incoming! How to Manage a Surge in Reverse Logistics Volumes

According to Digital Commerce 360 and Adobe Analytics, “Ecommerce sales crossed a record $5 billion on Thanksgivingsurged 21.6% on Black Friday, and increased 15.1% on Cyber Monday. And though we’re still waiting on the final numbers, should Adobe’s prediction for holiday sales prove accurate and online holiday season spending reach $189 billion, representing 33% growth year-over-year (YoY), 2020 will be permanently cemented into the holiday e-commerce sales record books.

But unfortunately for retailers, what goes out… might just come back. According to CBRE, e-commerce returns this season could total as much as $70.5 billion, a 73% increase from the previous five-year average, which means reverse logistics operations for many retailers will be tested like never before. In fact, the National Retail Federation predicts budgets for global reverse logistics technologies will also increase in 2021 — forecast last year to hit $604 billion by 2025 — as retailers look to streamline the consumer experience and minimize returns costs.

A Multi-Carrier Shipping System Enables Faster, Better Returns Management

Optimizing reverse logistics often comes down to having sophisticated logistics management practices in place, and a cloud-based multi-carrier shipping system will streamline returns shipping execution and reduce returns shipping costs. The most sophisticated solutions offer shippers the ability to determine the best returns policy and carrier services by automatically rate shopping across carriers in the retailer’s transportation network, selecting the most appropriate carrier services based on established business rules, printing necessary paperwork and labels, tracking inbound shipments, and auditing the entire shipping and returns process to identify cost-saving opportunities throughout the fulfillment lifecycle.

Tips to Reducing the Financial Impact of Returns

Dealing with e-commerce reverse logistics can be expensive. Statista projected return costs, including delivery and restocking, would reach $550 billion in 2020 alone, prompting retailers to aggressively work to reduce the cost and volume of returns long before peak season hit.

For some companies, the strategy is to avoid returns altogether. Many luxury brands have opted to go this route, choosing to skip the shipping, handling, and re-stocking expenses and improve customer service in one motion. E-tailers (sellers with no brick-and-mortar stores) are now increasingly following suit, sometimes telling customers to keep incorrect products and avoid the cost of returns, and in a new development, big box retailers such as Walmart and Target are also telling their customers to keep what they don’t want.

Other retailers, however, choose a different path and instead opt to handle returns and re-stock and re-sell their inventory. For these retailers, here are a few tips for streamlining returns processes and mitigating returns costs:

1. Move away from a single carrier strategy

If we have learned anything as a result of the COVID-19 pandemic, it’s that businesses need multiple carriers contracted and ready to go, and a multi-carrier shipping system to rate and rate shop carrier services across the transportation network. A multi-carrier shipping system will enable you to select the optimal carrier service for each return shipment according to your carrier contracts and business rules, balancing capacity, optimizing spend, and preventing inbound shipping delays so you can re-stock and re-sell inventory quickly.

2. Leverage data analytics and Business Intelligence

The right multi-carrier shipping system will also include Business Intelligence. These cost analysis tools will enable you to run contract analysis analytics that highlight carrier performance and cost metrics and compare carrier performance against contract terms. With these analytics in hand, you’ll be better informed during carrier renegotiations and empowered to select the best vendor long term. And if your volume is great enough, you might have the leverage to negotiate “any point to any point” rates for your returns with the big carriers (FedEx, USPS, UPS, DHL).

In addition, Business Intelligence will allow you to answer the question: Are you shipping to the optimal returns center? Sophisticated analytics will allow you to quantify the value of making adjustments to your returns strategy. For example, looking closely at the zip codes served by various returns centers, can you make adjustments for cost? Volume? Better carrier services? Is your network geographically optimal? Maybe you should move returns centers, or analyze outsourcing options for returns processing.

3. Prioritize the customer experience

The right multi-carrier shipping system will be flexible enough to allow you to choose the returns workflow and customer experience that works best for your business. The technology provides you with the ability to control for return shipment costs in any scenario, whether the customer is initiating the return online or working with an in-house customer service rep. Added bonus: the technology also guarantees your customer is using the right shipping label, regardless of whether the customer is dropping the return off at a UPS store or FedEx office or mailing it through the USPS.

In addition, a multi-carrier shipping system with Business Intelligence will allow you to assess your customer behaviors so that you can decide the best-fit approach to returns. For example, based on returns patterns, you may want to establish a relationship with FedEx (FedEx Office) or UPS (UPS Store) so customers can package and drop off returns easily.

4. Reduce the number of avoidable returns

Zero returns cost will always be cheaper than any returns cost. Analytics and Business Intelligence can play a pivotal role in uncovering a variety of cost-saving opportunities beyond criteria for returns carrier service selection. Analytics can identify weak links in fulfillment by tracing wrong product shipments to certain distribution centers, pickers, or procedural problems so staff can correct inventory and warehouse management processes or take other steps to resolve the issues.

When fulfillment errors do not explain patterns of recurring returns, analytics can point to potential merchandising problems and answer questions that include:

  • Which products are most returned and what can be done about it?
  • Are most of the returns originating from the same product or product category?
  • Should a retailer consider discontinuing product lines or only selling certain products in-store?

Identifying routinely-returned or problematic products gives the retailer a chance to take proactive steps to address the issues – whether it’s something as simple as an incorrect size listing in a product description or something more serious, such as a defect in the manufacturing, prompting regular returns.

5. Combat fraudulent returns

Analytics can also play a critical role in identifying the prevalence of fraudulent returns and determining their impact. Combatting fraud helps many organizations reduce the cost and volume of returns, as annual losses from fraudulent returns are estimated at $27 billion, according to Appriss Retail, who also estimates return fraud at 8.8% in 2019, a 76% increase year-over-year.

Luxury brands in particular need processes in place to ensure they never accept counterfeit products as legitimate returns; even infrequent instances of fraudulent luxury product returns can wreak havoc on organizations. Every effort should be made to determine how often this happens and deter future instances.

Select the Right Multi-Carrier Shipping System to Better Manage Reverse Logistics

Reverse logistics will always have a peak season after the holidays, and an inability to maximize efficiency in reverse processes will routinely lead to higher costs. Fortunately, using an advanced multi-carrier shipping system can make a world of difference, and many companies turn to Logistyx technology and expertise to customize and automate their returns processes.

Download our white paper: Managing the Rise (and Cost) of Returns to learn more about how a cloud multi-carrier shipping system can help you save money on your returns.