E-commerce has always presented challenges for reverse logistics supply chains. Customers shopping online expect free, frictionless shipping for purchases and returns, forcing omnichannel and pure-play e-commerce retailers to optimize their returns processes to stay competitive. The COVID-19 pandemic drastically increased online shopping, exacerbating these challenges for companies already struggling to meet shifting demand.

According to research by Invesp, a consultancy specializing in conversion rate optimization (CRO), at least 30% of products bought online are returned; 67% of shoppers check the return policy of a retail site before making a purchase; 79% of customers expect free returns shipping; and 49% of retailers offer it, despite the high cost of processing the return.

Most retailers require a third-party logistics provider to help navigate the complex web of reverse supply chains. When choosing the right reverse logistics provider, the most successful retailers will ask these key questions:

Does the provider have the required infrastructure and the ability to scale efficiently?

Managing returns for a variety of retail products requires a complex approach that combines both digital and physical capabilities. Companies must utilize reverse supply chains that optimize the returns process by item and condition to determine the most efficient way to handle the product. A well-functioning system will help make strategic decisions about whether the item should be restocked, returned to the manufacturer, donated, recycled or disposed of. How the product is ultimately handled depends on a range of factors, including cost and environmental, social and governance (ESG) metrics. Most importantly, a company’s reverse supply chain must be easily scalable to mitigate loss in the case of sudden crisis or downturn.  

In order to achieve this level of efficiency and flexibility, many small to mid-size companies — as well as larger companies with specific needs — turn to reverse logistics providers with a strong physical infrastructure. This allows for more nearby drop-off points and the ability to process returns as close to the end user as possible, cutting both costs and emissions.

Does the provider have the ability to evaluate and optimize all potential actions within each return channel? 

Manufacturers today have many after-sale options for processing and disposing of a return. The most advantageous option is putting it back into sellable stock. Defective goods are returned to the vendor. Depending on condition and market value, a return may end up discounted and sold into a secondary market, sold as materials for recycling or donated to charity.

A good returns solution relies on both human and digital insight. In order to optimize resale/reuse value, companies should combine a human-conducted assessment of the product’s condition and brand significance with automated analytics that measure the cost of the return against its value in different markets. Together these components allow companies to optimize the returns process under any circumstance.

Does the provider’s solution or platform help contain risk? 

Returns add a new layer to existing business challenges such as supply-and-demand forecasting and inventory management. In some states, for example, returns aren’t considered part of the forward supply chain and interstate commerce, but are considered waste product. Items with hazardous materials — aerosol sprays, electronics, solvents — may be hazardous waste subject to state laws governing proper transit and disposal. 

Retailers take on additional risk by using third-party liquidators or auction sites, which may sell to online discounters rather than into non-competing channels like brick-and-mortar stores or flea markets. As a result, these third-party players serve a secondary market in direct competition with the retail client. 

To mitigate these risks in the returns process, platforms and logistics providers need specialized insight into the unique requirements for returned goods based on product and region.

Does the provider’s solution support the organization’s sustainability initiatives? 

Consumers are increasingly making sustainability a priority in their purchasing decisions. Retailers are now seeing that it makes good business sense to reduce costs and eliminate waste while improving the customer experience. 

Consolidating returns regionally and processing them closer to where the goods originate reduces truck trips and related pollution, shortens last-mile travel times and lowers costs. Finding reuse/recycle liquidation opportunities for a wide range of products, such as bio-recycling for fuel or plastics for apparel, offers revenue-earning alternatives to destruction and landfill disposal. Even programs that arrange for alternative disposal of products like expired medicines, chemicals or electronics generate customer goodwill at relatively low cost.

Can the provider deliver insights such as why a return was initiated? 

If the goal in returns processing is to identify and achieve an optimal outcome for each item — balancing profitability, strategic business objectives and social responsibility — then the process itself is essentially a forensic analysis. It begins with a need to understand why the return is occurring. 

Often the answer can be hard to pin down. When asked why they are returning a given item, shoppers typically provide an answer designed to create a path of least resistance to a refund. Analytics built upon historic data might reveal multiple problems with a certain model sneaker in a certain color or size. Thorough inspections over time might reveal manufacturing defects or unusual wear in a particular place. Connecting the dots tells the retailer not to restock the item, but to notify the manufacturer and return remaining inventory. The manufacturer can correct production and avoid future returns.

In today’s e-commerce and social media environment, returns are no longer just about compensation for inventory but about customer experience and retention. The key questions retailers should be asking are why the return happened in the first place and what can be done to fix the problem quickly to keep the customer happy.

Inmar Intelligence Optimizes the Reverse Logistics Supply Chain 

Inmar Intelligence offers a range of technologies and data analytics solutions for retail/CPG, healthcare and government clients, including payment processing and settlement; returns management; retail media, influencer marketing and incentives solutions; and pharmaceutical returns, take-back and recalls. It also offers physical e-commerce returns management through its regional DCs and via 2,700 mall, university, FedEx-office, and other “return bar” locations, in partnership with returns management provider Happy Returns.

Inmar has proved essential for its clients throughout the COVID-19 pandemic. “There were so many supply chain needs playing out at once, with retailers scrambling to get product and consumers shifting en masse to home delivery as stores shut down,” says Ken Bays, vice president, product management at Inmar. “Throughout COVID, we saw retailers who were able to keep their stores open — the home improvement stores, the grocery stores, the big box stores — scramble to offer curbside delivery, in-store fulfillment and buy online/pick up in store options. We want to help retailers with those alternative options.” 

Customer demand for a smaller carbon footprint and greener practices, Bays argues, is forcing long overdue change in returns management, where landfill disposal had long been the default position. Less than 1% of the nearly 600 million digital and physical returns processed by Inmar annually end up in landfills. Consolidated vendor returns and reverse-to-forward logistics help reduce trips, transportation-related emissions and associated costs. Product shipped to and from Inmar facilities moves in reusable containers. Unusable product is sustainably processed through an energy-from-waste program.

As Inmar continues to look forward, Bays sees opportunities to broaden pick-up and drop-off locations through an expanded network of more frequently visited retail locations such as grocery stores, drug stores and dollar stores. Bays also believes there is an opportunity to integrate incentives and promotions into the returns process.