Amin Sikander, Head of Supply Chain Practice and Co-founder, Gaea Global Technologies10.14.20
Since the second quarter of 2020, e-commerce has increased due to onsite shopping restrictions resulting from the pandemic. Customers went online to purchase food, cleaning supplies and clothing.
According to Adobe’s Digital Economy Index, in the US, e-commerce increased 49% in April compared to the prior month.
This trend does not appear to be a short-term spike. Retail e-commerce is expected to continue increasing in a post-COVID-19 world. In June, large retailer Inditex announced that it will close about 1,200 retail stores around the world to boost online shopping. Other companies are likely to follow suit.
If online sales increase, it is logical that online returns will also increase not only because of the increased sales, but because shopping online is a different experience than shopping in a brick-and-mortar store. Online shoppers are unable to try on items to judge fit and material before purchase. As a result, some customers buy several slightly different items, or even the same item in different sizes and colors. They try the items on at home and return what they don’t want. It therefore comes as no surprise to learn that online purchases are returned up to 30% more often than in-store purchases.
Increased online returns can become a problem for some retailers, who will have to find new processes – specifically labeling processes – to streamline reverse logistics. Without streamlining their return processes now, they may be unable to maintain current margins without adding return fees for customers, who are currently quite used to returning items for free.
Having to pay for returns will likely prevent consumers from purchasing items online, so brands usually cover this cost. But what exactly are the return costs? First, there is the logistics cost. This cost comes from the software and personnel required to start a return in their system and send a return label to the customer, and to track the shipment until it arrives at the facility where it is then inspected. This process can take more or less time based on the capabilities to streamline reverse shipping, the number of parties involved, and location, among other details.
The second cost has to do with the product. Once a brand has received a returned item, it will have to determine if the item can be immediately restocked or if it needs to be repacked. If a brand can’t resell a product, should it be donated, recycled, or go to a landfill? The decision varies based on the product, the timing, the condition, and so on. But for retailers, it’s more likely that a product will be inspected, steamed, and restocked, so it is crucial to receive that product quickly.
According to Gartner Research, less than half of all returns are resold at full price. Delayed returns can cause excess of inventory and loss; it is difficult to sell a wool scarf in April or a swimsuit after the summer season. In other words, the sooner a product is restocked, the sooner it will be available to a new customer, and reverse logistics, labeling in particular, plays a key role.
The return process starts with return labels
Return labels help allocate and classify a product throughout the return process. A misspelling, incorrect format, blank field, or an outdated label can delay return shipping. Accurate information in return labels is vital to maintain a smooth reverse logistics process, margins, and stock moving in and out of the warehouse in the shortest possible time.
Companies sometimes overlook the labeling process and focus on improving other areas of their supply chain, like fleet and warehouses, but labels are equally important. The automated label generation process is becoming a popular improvement.
The practice of a consumer contacting customer service to process a return or manually enter shipping information – the type of shipment, username, account number, and so on – to generate return labels should be left behind. Technology opens many possibilities and new ways to make this process efficient.
Customers will return if the return process is easy. Easy returns – and an easy labeling process – can also increase customer satisfaction and retention. According to a return logistics company survey, almost three-quarters of American consumers stated that returns are their least favorite part of online shopping. A recent report also showed that 89% of consumers are less likely to shop from the same retailer if they have a bad return experience.
Customers don’t want to spend time filling out a form to return a product or waiting for customer service to verify a return and email a shipping label. A system for online returns with quick access to return labels can retain customers as it gives them the speed and convenience they desire. In the end, customers will return if they have a good experience even though they returned a product.
Analyze labeling processes
To sum up, with online shopping growing exponentially and a forecast of higher than average online returns, retailers should focus their attention on reverse logistics processes and technology, particularly on return labeling processes. This focus shift will prevent high costs associated with return delays and help increase brand reputation and consumer trust.
Retailers can ask sample questions to analyze their current labeling processes and identify areas of improvement. For example:
Label Generation
According to Adobe’s Digital Economy Index, in the US, e-commerce increased 49% in April compared to the prior month.
This trend does not appear to be a short-term spike. Retail e-commerce is expected to continue increasing in a post-COVID-19 world. In June, large retailer Inditex announced that it will close about 1,200 retail stores around the world to boost online shopping. Other companies are likely to follow suit.
If online sales increase, it is logical that online returns will also increase not only because of the increased sales, but because shopping online is a different experience than shopping in a brick-and-mortar store. Online shoppers are unable to try on items to judge fit and material before purchase. As a result, some customers buy several slightly different items, or even the same item in different sizes and colors. They try the items on at home and return what they don’t want. It therefore comes as no surprise to learn that online purchases are returned up to 30% more often than in-store purchases.
Increased online returns can become a problem for some retailers, who will have to find new processes – specifically labeling processes – to streamline reverse logistics. Without streamlining their return processes now, they may be unable to maintain current margins without adding return fees for customers, who are currently quite used to returning items for free.
Having to pay for returns will likely prevent consumers from purchasing items online, so brands usually cover this cost. But what exactly are the return costs? First, there is the logistics cost. This cost comes from the software and personnel required to start a return in their system and send a return label to the customer, and to track the shipment until it arrives at the facility where it is then inspected. This process can take more or less time based on the capabilities to streamline reverse shipping, the number of parties involved, and location, among other details.
The second cost has to do with the product. Once a brand has received a returned item, it will have to determine if the item can be immediately restocked or if it needs to be repacked. If a brand can’t resell a product, should it be donated, recycled, or go to a landfill? The decision varies based on the product, the timing, the condition, and so on. But for retailers, it’s more likely that a product will be inspected, steamed, and restocked, so it is crucial to receive that product quickly.
According to Gartner Research, less than half of all returns are resold at full price. Delayed returns can cause excess of inventory and loss; it is difficult to sell a wool scarf in April or a swimsuit after the summer season. In other words, the sooner a product is restocked, the sooner it will be available to a new customer, and reverse logistics, labeling in particular, plays a key role.
The return process starts with return labels
Return labels help allocate and classify a product throughout the return process. A misspelling, incorrect format, blank field, or an outdated label can delay return shipping. Accurate information in return labels is vital to maintain a smooth reverse logistics process, margins, and stock moving in and out of the warehouse in the shortest possible time.
Companies sometimes overlook the labeling process and focus on improving other areas of their supply chain, like fleet and warehouses, but labels are equally important. The automated label generation process is becoming a popular improvement.
The practice of a consumer contacting customer service to process a return or manually enter shipping information – the type of shipment, username, account number, and so on – to generate return labels should be left behind. Technology opens many possibilities and new ways to make this process efficient.
Customers will return if the return process is easy. Easy returns – and an easy labeling process – can also increase customer satisfaction and retention. According to a return logistics company survey, almost three-quarters of American consumers stated that returns are their least favorite part of online shopping. A recent report also showed that 89% of consumers are less likely to shop from the same retailer if they have a bad return experience.
Customers don’t want to spend time filling out a form to return a product or waiting for customer service to verify a return and email a shipping label. A system for online returns with quick access to return labels can retain customers as it gives them the speed and convenience they desire. In the end, customers will return if they have a good experience even though they returned a product.
Analyze labeling processes
To sum up, with online shopping growing exponentially and a forecast of higher than average online returns, retailers should focus their attention on reverse logistics processes and technology, particularly on return labeling processes. This focus shift will prevent high costs associated with return delays and help increase brand reputation and consumer trust.
Retailers can ask sample questions to analyze their current labeling processes and identify areas of improvement. For example:
Label Generation
- How much time are we investing in generating return labels?
- How much time do we spend on supplier compliance for labels?
- Do we have the ability to automatically generate return labels if a return is requested?
- Does our labeling software integrate with other supply chain systems?
- Can we generate labels based on business rules?
- How is this process being handled now?
- How do we store our label templates?
- Do we have a management system to centralize label templates, or each department is working in its own silo?
- Do we have a system to track returns?
- Are all our returns that arrive at our dock door properly labeled?
- Do some of them arrive with little or no documentation?
- Have we surveyed customers for their opinions when processing returns?
- Are customers satisfied with the process, or do they find it cumbersome?
