Over the past few years, but especially since the pandemic, companies have learned that “the way we have always done it” is not going to work anymore. This is particularly true when it comes to reverse logistics and returns management, which I’ve called the migraine headache of e-commerce. Why is transforming returns management more important than ever? How can technology enable this transformation? Those are the key questions I discussed with Gaurav Saran, CEO of ReverseLogix, during a recent episode of Talking Logistics.
The Returns Headache
I began our discussion by asking Gaurav why returns have become such a headache for supply chains. Gaurav notes there are several reasons.
“First, if you look at the sheer volume of returns in recent years, the ecommerce return rate is over 30%. Think of what that means – over 30% of what you thought you sold is coming back. Compare that to a typical brick & mortar return rate of 8% or less.”
“The second piece is customer behavior,” continues Gaurav. “The Amazon experience has customers expecting to be able to return things quickly and easily. That has fueled an increased percentage of returns. Currently, 67% of customers will check your returns policy before making a purchase, and that’s a massive number.”
Gaurav went on to explain that in the past, companies could sweep returns under the rug and deal with them using spreadsheets or point solutions like a warehouse management system (WMS). With the large and growing volume of returns today, companies are starting to make returns part of their corporate strategy and are deploying returns management systems (RMS).
“Companies are trying to improve the customer experience. By having an RMS, companies can improve customer satisfaction by 15%-25%. That’s important for the brand because if the customer is not happy with the returns experience, you’re probably going to get negative posts on social media pretty quickly.
“The second big piece is profitability. By having a purpose-built, end-to-end returns management capability, companies can increase net profitability by up to five percent.”
Gaurav explains that if you have visibility to returns you can make decisions quickly on whether to ship the products directly to other locations or to stores that are low on inventory, especially with seasonal products. And knowing why products are being returned provides insights on how you might need to improve your products. “So, there are a number of factors that lead to better customer satisfaction on one end and greater profitability on the other end,” says Gaurav. “These can be important levers in corporate strategy.”
Where Does RMS Fit In Existing IT Ecosystem?
I asked how companies are currently handling returns and how an RMS fits into their IT strategy. Gaurav notes that companies that have a high volume and/or high value of returns often look at using a WMS, order management system (OMS), a point solution and their ERP to deal with returns, but this adds complexity without adequately solving the problem. “Those are systems of record, but you need a system of authoring like an end-to-end RMS that will seamlessly integrate with those systems,” says Gaurav. “Having one integrated platform to handle initiating, processing, repairs and feedback will provide the best results.”
Important RMS Capabilities
Gaurav indicates there are five main capabilities or levers companies should consider when looking for an RMS. First, the RMS should be able to give you some level of intelligence, such as determining if returning a seasonal product after the season is over makes economic sense. Also, can the system provide predictive analysis of what to do with the return, such as where to route it to save on shipping and time.
Second, does the RMS help you receive, inspect, and grade the returned products quickly and easily, and determine the proper disposition, all within the same platform? This will save on labor, which is especially important with the current labor shortage.
The third consideration is quality. Are you able to provide a quality returns experience for the customer? Besides just processing a credit, does the system keep the customer engaged by offering other options such as replacement or similar products, or giving them a coupon for future purchases?
Also, does the system help you to learn from the returns and provide a feedback loop to manufacturing, design, and marketing? For example, are there quality or sizing issues that need to be addressed?
The fourth consideration is cost. Can the system use returns visibility to properly schedule labor at the right time and place to process the returns? That will reduce costs.
Finally, does the RMS enable you to process returns efficiently — at the right facility, with the best route, etc. “Looking at these five levers holistically is the key to improving returns processing,” says Gaurav.
The Pandemic and Digital Transformation
The pandemic has caused many companies to speed up their digital transformation journey. I asked Gaurav how that has impacted returns management. He provided a wealth of information on what companies are doing, the functions impacted, and what it means to these organizations’ success, as well as what companies should ask themselves to evaluate where they are in this journey. Therefore, I encourage you to watch the full episode for all of Gaurav’s insights and advice on this topic. Then keep the discussion going by posting a comment and sharing your own perspective and experience on returns management.