Team eCommerce Next interviewed Johannes Panzer from Descartes to get more insights on How Reverse Logistics Can Help Ecommerce Move Forward. Following is our interview with him:
Amidst pandemic constrictions and heightened supply chain disruption, can you give some insight into the current status of the reverse logistics arena and what companies are up against today versus in years past?
The volume of online orders has drastically risen throughout the last two years. With that, so has the number of returns. According to the National Retail Federation, the average rate of returns for online purchases was 20.8%—an increase from 18.1% last year. This equates to almost $220 billion of merchandise that was returned. With stakes this high, retailers cannot afford to see online returns as a negligible problem anymore.
The threshold to return an order (or parts of an order) is very low, partially due to the extremely accommodating, customer-friendly return policy at Amazon; customers who shop online expect to be able to return an order at either low cost—or even no cost. Now, in addition to cost, retailers must take note of another part of the returns experience that has grown in importance: convenience. In fact, a recent survey of retailers by McKinsey found that up to 70% of respondents now offer free return shipping on some or all items, which underscores how no-cost/low-cost returns are becoming the norm.
Communication is also critical to making the returns experience convenient: customers today want to be kept as informed about the status of their return as they are about their delivery (e.g., when will the return arrive, has the retailer received it, when will I receive the refund?). Good ecommerce workforce management systems should support this level of customer communication and be able to send auto-notifications to customers via email, text, etc. about the status of their return as it makes its way through the reverse logistics process.
With respect to supply chain disruptions, retailers need a quick, efficient returns management process that allows them to put returned goods (if the quality of the product allows it) back into stock—and thus available for sale—as soon as possible. With supply chain disruptions affecting inventory levels across all types of businesses, it’s even more critical that returns are processed as soon as possible, especially if they can be restocked.
Where do you think brands often go awry in building out their reverse logistics strategies, even from the start?
For many brands, what’s often at the root of the problem is the fact that their processes are not efficient enough to begin with; that is, they are reliant on manual, paper-based returns tasks. In many cases, the customer receives little to no information about the status of a return shipment or refund. Especially with spikes in demand, whether influencer-based order surges or holiday shopping peaks like Black Friday/Cyber Monday, vendors often find themselves not only overwhelmed by the sheer number of orders they must fulfill, but also by the immense volume of returns that need to be processed
The danger is clear: what looks like a certain success (e.g., a social media influencer promotes a product, leading to massive rise in sales volume) could lead to a true customer satisfaction disaster in the event even some customers return the item and have to wait for their return to be processed, and their money refunded. Unhappy customers are often quick to leave negative reviews on relevant rating portals, which could negatively impact the business.
Another potential pitfall is looking at reverse logistics only as a cost center. Companies that treat returns as pure cost make a costly mistake—because returns today are an integral part of the online/omnichannel buying experience. Returns need to be seen as a service to customers and a convenient one to make them want to come back and purchase again.
What can brands and logistics providers do to minimize reverse logistics issues moving forward?
Customers have a wide variety of reasons for returning products. To keep return rates as low as possible, detailed product descriptions, professional packaging and short delivery times have proven to be success factors. Returns, however, cannot be completely avoided. One goal, therefore, is to get returned goods back in inventory and available for sale as quickly as possible and with as little effort as possible. With a mobile app specifically developed to be used with ecommerce-enabled warehouse management systems (WMS), returns can be processed efficiently and error-free, directly on a mobile device like a smartphone. The second goal is the customer experience. Part of more automated, technology-driven returns management is the ability to easily generate payments and credit notes for customers—as well as customer notifications and updates to keep them informed until the returns process is fully complete.
Tactics like retailer return portals for instance are a trend expected to become more prevalent. Do you think this is a viable method to alleviate reverse logistics pressures? Are there other tactics or strategies retailers can implement to strengthen their abilities in handling reverse logistics and returns?
Returns portals where customers log in to initiate the returns process are absolutely viable. Not only do they make forecasting of expected returns easier, but they can also create cross-sell and up-sell opportunities by sending customers specific marketing messaging during the returns process. For example, customers could receive specific vouchers/gift cards as an incentive to not send something back or to make a separate purchase. The options are endless!
For some types of retailers with high return rates (e.g., discounted fashion), one strategy to help preserve margins on merchandise already sold at low prices is to not offer returns free of charge. While it’s not a strategy for all vendors, having a cost associated with returns may mean customers shop more carefully to minimize being out of pocket in the event they want to return their purchase.
How will technology like AI and ML play more of a significant role with reverse logistics moving forward?
If emerging technology such as AI and ML become more widely incorporated in the selling process, customers in theory could be making purchases more tailored to what they really want/like in terms of aesthetic and fit. Again, this is particularly relevant in fashion ecommerce: imagine an AI-based algorithm informing the online consumer exactly which pair of pants are the perfect choice, the perfect color and the ideal size. Customers won’t have to hedge their bets by ordering multiple pants in numerous variations to find the perfect pair—which would minimize the prospect of returns for both customers and vendors alike.
We’re obviously through the major holiday season, but what other peaks should businesses prepare for this year and how can they get more ahead of Holiday 2022?
The analysis of past peaks is essential for the preparation of shipping-intensive periods. Evaluating the sales figures of past peaks according to articles and categories is critical. What items sold better than average? What didn’t sell at all? Based on these figures, vendors can calculate a clearer forecast of required inventory levels for the next peak before it hits. In this way, vendors can minimize potentially sold-out items or long customer wait times before a product they order is delivered. It is also important to find out which suppliers’ new goods can be ordered and the anticipated time for delivery. Warehouse layout should also be considered. Place seasonal/”hot” items near shipping stations so that warehouse employees only have short distances to walk for fulfillment. In the same way, clear these A-storage locations of C-items that are hardly in demand and store them further back in the warehouse.
Anything else you’d like to share?
The No. 1 reverse logistics theme for 2022 will be convenience for the consumer. Over the next year, according to Shopify, 54% of consumers say they’re likely to look at a product online and buy in-store, and 53% are likely to look at a product in-store and buy online. It’s become clearer than ever that customer acquisition costs (CAC) have never been as high as they are now. As such, leading merchants focused on continuing their growth trajectory need to make sure to have a cost-effective returns process and remove any hurdles to returns that might occur in the buying experience.
About Johannes Panzer
Johannes Panzer is Head of Industry Solutions for Ecommerce, Descartes. With over 15 years of experience in e-Commerce, Panzer is known as a domain expert in e-Commerce fulfillment and logistics. He plays a central role in developing the go-to-market strategy and positioning for Descartes’ Ecommerce solutions globally. Panzer has a background in marketing and is experienced in agile project management, with several years leading the Descartes product management group in Germany.
Descartes Systems Group is the Leading provider of technology solutions for logistics and supply chain management. Logistics Technology Platform digitally combines the world’s most expansive logistics network with the industry’s broadest array of logistics management applications and most comprehensive offering of global trade related intelligence. It helps get inventory, information, assets and people where they’re needed, when they’re needed.