Why e-tailers Need to Think Ahead
March 9, 2020
Every business in the world of online retail, otherwise known as e-tail, is now very well acquainted with a new reality.
Nobody can afford to overlook returns.
In fact, a report by CBRE and Optoro concluded that $42 billion worth of online holiday purchases would likely be returned
in the months following the 2019 high-spending season.
E-commerce has altered the commercial landscape in a way that resulted in profound changes to the traditional outbound logistics model. Now, as e-tailers strive to outdo each other in an effort to lure customers away from their rivals, free returns have become the norm.
It's understandable why consumers would be drawn to this service. Not only does online shopping limit their ability to test out new devices or try on their next outfit – customers are worried items will be damaged during shipping, through no fault of their own.
While the model works well for consumers, businesses have to think ahead in order to make sure they don't overextend themselves as they seek new customers and subscribers.
Issue No. 1: Depreciation of value
When a customer returns an item to an e-tailer, there's no opportunity for an on-the-spot inspection, and there's no telling what can happen to an item between the time it's shipped and when it's received.
Even under the best circumstances, outdated technology and out-of-season styles lose value by the month or even the week.
Whether the e-tailer chooses to attempt re-listing the same item and selling it to a second customer, or they opt to offload the merchandise to a third party - or even chuck it altogether - the supplier could be looking at a loss.
Issue No. 2: The cost of processing returned goods
Regardless of what happens to an item after it's returned, the act of receiving used merchandise adds logistical complexity, and costs, for the e-tailer.
These extra costs come in two main forms:
- The price of extra touches as the item is processed a second time.
- The burden of limited warehouse space.
If an e-tailer doesn't have enough warehouse space to manage the influx of returns they receive after a purchasing surge, they could run into issues on two fronts. First, they may have to lease extra warehouse space, which is already at a premium in many markets across the country. Second, they could risk errors and delays in outbound processing for their existing inventory, resulting in reduced customer satisfaction and lower sales.
What's an e-tailer to do?
In today's e-commerce environment, e-tailers need to think outside of the box, even as they're deciding where to put all their boxes.
One way or another, reverse logistics have to be built into e-tailers' business models if they're going to remain competitive when it comes to returns.
Many e-tailers are embracing the notion of a "circular economy." Instead of goods being sold, used and eventually trashed, companies want to figure out how they can help customers get the greatest use out of their products before sharing, recycling or otherwise extending the life of material goods.
For example, take online apparel retailer Flip
. Returns are built into the value proposition at this company. Customers receive several items and decide which ones to keep. Then, they simply return the others. Additionally, Flip gives customers store credit for sending in their own used clothes.
By operating this way, this innovative e-tailer sets the terms for its customers while participating in the circular economy. Reverse logistics are just how they do business!
In addition to creative problem-solving, working with a dedicated third-party logistics provider that has experience in reverse logistics can help e-tailers alleviate the burden of dealing with returns.
Find out how Atlas Logistics® can help you manage your reverse logistics needs