The challenge of retail returns and reverse logistics
The rise of e-commerce has never been a secret in the corridors of the global supply chain. What once started out as adding value to the existing retail model and was seen by some as a passing fad has now far exceeded the rate of growth exhibited by its traditional counterpart.
E-commerce has been the fastest growing market entry route for most retailers and for more than a handful of consumer goods companies.
If that wasn’t enough, the pandemic has further accelerated its growth. Consumers spent $ 861.12 billion online with U.S. retailers in 2020, up 44% from $ 598.02 billion in 2019, according to the latest Digital Commerce 360 ââanalysis. Online spending represented 21.3% of total retail sales last year, up from 15.8% the year before. The situation in the UK was no different, with an online growth rate of over 37% in 2020, six times more than in 2019.
While this meteoric rise in e-commerce has created opportunities like never before, it has also brought challenges that we cannot shy away from. Many brands established in the UK and US filed for bankruptcy last year. Some of the biggest brands have flirted with the inevitable before due to a change in ownership. Many others were not so lucky.
One of the most important items on this list contributing to these challenges is returns and reverse logistics, which could be a particularly damaging process if left free. While this has always been of great concern for a variety of operational and business reasons, the lack of personnel and delivery and collection infrastructure has made matters worse.
The latest change in consumer behavior has not only increased the share of e-commerce in industries like fashion and beauty, but it has also increased further in categories like home and garden and electricity. From the point of view of the volume of returns, not only did this increase the share even further, but also made the handling of the products more complex. There have also been numerous news articles referring to large e-commerce vendors destroying millions of unsold and returned items.
There are five key challenges contributing to return issues: the cost of refurbishment, the lack of fashion spikes for returned products, the cost of logistics, poorly designed processes, and sustainability issues. While these challenges are still very valid in 2021, three other challenges contribute to the stakes:
- Availability of the appropriate warehouse and transportation infrastructure to support effective returns management.
- Lack of digital infrastructure to support good visibility and good decision making.
- A lack of focus on returns when it comes to developing a strong supply chain strategy.
Yields, by definition, are unsustainable and lead to process inefficiencies and erosion of margins. But, with over 91% of customers viewing the return policy as an important part of the purchasing decision, product returns are definitely an active part of the new normal.
However, with careful management of the returns process, the development of the right logistics and digital infrastructure, and the development of a strong returns management strategy, we can most certainly mitigate the blow to our environmental footprint and bottom line. .