Reversing the returns crisis

When it comes to the logistics of online shopping, much of the attention is focused on delivery. But, for the bottom line, the returns process is just as key.

‘Over 80 per cent of consumers look at the ease of returns when it comes to deciding where to buy,’ says Elizabeth Birnbaum, Global Senior Product Development Manager at DHL Supply Chain, which has set itself a ‘gold standard’ target of processing returns within 24 to 48 hours.

‘Over 20 per cent of online purchases are returned and that’s a huge amount of product for companies to process and refund,’ says Birnbaum.

This comes at a cost both to the company – it is estimated that the cost of returns accounts for about 15 per cent of an order’s value – and to the environment, with over 15 per cent of electronic goods and more than five per cent of clothing returns heading for disposal.

‘That’s a lot of product going to waste plus the loss of revenue from the stock that can’t be resold,’ says Birnbaum.

There’s a growing urgency to address this because not only are returns ever-growing but the market itself is changing, adding more complexity and costs to the reverse supply chain. Andy Meeson, Director of Returns at Pro Carrier, pointed out that changes in the marketplace, with the rise of drop shipping and marketplace models with their huge range of products from multiple vendors, have increased the urgency to better track and manage returns.

With the changes in the market, with the rise of drop shipping and marketplace models, if product comes back to a centralised warehouse, your Standard Operating Procedures go out the window. You need AI to look at the products coming in, how can you scope this and build standardised SOPs for each product.

Andy Meeson
Director of returns,
Pro Carrier

These are huge challenges for a part of the supply chain that has been neglected, lagging at least ten years behind the outbound supply chain. Playing catching up will require investment in technology, with data, analytics and automation the key to making the returns process as smart and efficient as delivery.

Here’s Helen Scurfield, Chief Executive Officer – Global Returns, at Asendia explaining how analytics and AI are increasingly being used to transform – and even to avoid from the point of sale – the returns process.

A returns specific management system essential for data-driven workflow within the warehouse to avoid double handling and reduce inefficiencies.

‘The cost is driven by labour, more so than other processes in the warehouse, with labour costs as much as 70 to 80 per cent of total fulfilment costs,’ says Elizabeth Birnbaum, Global Senior Product Development Manager at DHL Supply Chain, who estimates that returns specific technology can improve productivity by 30 per cent or more.

Returns tracking is essential at every stage so customers can be kept in the loop and know when they will get their refund. Speed is key for their satisfaction – and to get unsold stock back on the digital shelves.

There’s huge scope to optimise product recovery and waste management, not just for more efficient supply chain management but also to meet sustainability and circular economy goals. Much waste happens, even of high value items, due to damaged packaging, which creates the potential for quick wins by providing a repackaging service in the warehouse so that stock can be recovered and re-sold to another customer.

Refurbishment is another key service that can be offered within the warehouse, although it should be decoupled from the standard returns process so as not to create bottlenecks, says Elizabeth Birnbaum, highlighting how DHL’s provision of refurbishment services for a large online marketplace in Europe helped its client recover €10 million worth of clothing, accessories and shoes per year.

These are significant sums and significant volumes of goods. With the consumer appetite for online shopping – and free returns - showing no signs of waning, the commercial advantage will lie with those retailers that can deliver efficiency and convenience through the life cycle of a sale, whether the end point is a successful purchase or a swift refund.