The popularity of online shopping has accelerated rapidly over the last 18 months, with U.S. e-commerce brands experiencing 44% growth in 2020. Shoppers have become increasingly inclined to buy items online that, prior to the pandemic, they might have purchased in-store. Retailers have had to adapt quickly to provide consumers with the best possible online shopping experience, while maximizing profits during these disruptive times.

Because of this seismic shift in retail shopping trends, merchants that previously focused on brick-and-mortar sales are facing a mountain of product returns without the proper infrastructure to handle the volume in a profitable way. Managing returns is driving up costs and becoming a growing concern for business leaders. As such, it’s never been more important for retailers to solve the reverse logistics puzzle.  

In today's reverse logistics ecosystem, the customer experience is increasingly reliant on high-quality processing, and the nature of returns is far more complex. Consumers today expect an omnichannel retail experience, and reverse logistics is a huge part of the overall customer experience.

According to Shopify, 58% of shoppers say they are “not satisfied” with the ease of making returns. Poor returns processes and a lack of transparency about the returns policy can cause customers to permanently abandon a brand. Moreover, 72% of shoppers are willing to spend more per order, and order more frequently from online stores, with a customer-friendly returns process. Making the process easy, straightforward and flexible is key to a great customer returns experience.  

Much like free shipping, cheap and easy returns have become a critical piece of marketing for e-commerce retailers. Indeed, flexible return policies are a primary reason why consumers are willing to take a risk and buy an item they haven’t had the opportunity to see in person.

To profit under these conditions, businesses need a provider that can develop a customer-friendly process, while remaining cost-effective and maximizing the value of each returned item. Effective reverse logistics can lead to a higher level of customer satisfaction, while improving the bottom line. It further ensures that, whenever possible, products are reused rather than wasted, benefitting the supply chain, the circular economy and the environment.

There are a multitude of options for handling returns, including return to stock, remanufacturing, liquidation, and resale through a secondary channel. But the speed at which these decisions must be taken makes it difficult for leaders to ensure they’re not missing opportunities. That’s why an increasing number of businesses are looking to cutting-edge technology, as they strive to maximize the value from every return.

With limited acquisition costs and very low capital investment, today’s technology is typically a cloud-based, software-as-a-service (SaaS) platform that can be deployed across the entire physical network. It provides access to data that can unlock strategic insights and inform real-time decision-making. Ideally, retailers, e-commerce sellers and others will use artificial intelligence to decide whether it makes economic sense to process a return, or determine the optimal disposition even before induction. By analyzing the available data and using analytics to dynamically evaluate a variety of market factors impacting resale potential, upstream decisions can be made that reduce touches and costs, and increase net recovery rates.

Employing technology to simplify the returns process can also improve customer loyalty.

The most useful platforms allow you to offer convenient return options that cater to varying customer preferences. Customers must be able to make a return in whichever way that suits them — whether through an online portal, on the phone, or across a physical network of stores.

These varying customer preferences create a further challenge: How do you achieve the flexibility customers demand within a cost-effective system?

The key lies in finding patterns in consumer preferences and optimizing your system based on that information. Understanding the patterns of return requests, along with how frequently each item or SKU is returned, will allow you to uncover opportunities for improvement across the reverse logistics ecosystem. 

Ultimately, aggregating the information on your returns enables you to start building the data model required to optimize disposition decisions in real time. Once that model is built, you can use machine learning to improve return dispositioning, and eventually automate the process for even greater marginal efficiency gains.

Such gains aren’t the only benefit that analytics can offer. While financial efficiency is vital, many businesses see equal value in the application of recovery analytics to saving the planet. By utilizing data to maximize opportunities for restocking, companies can incorporate sustainability into their practices.

For businesses large and small, there’s a clear mandate to become as environmentally friendly as possible. According to recent surveys, 62% of consumers want companies to take a stand on sustainability, while 75% will refuse to purchase a product if they learn that the seller supports an issue contrary to their beliefs.

Through better returns management, businesses can disposition and recover products so that they stay out of landfills and garbage dumps. Analytics can help to ensure that items are repurposed wherever possible, ultimately reducing the carbon footprint while increasing profitability.

Julian Mitchell is chief information officer with G2 Reverse Logistics.